<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1996.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______ TO ______.
COMMISSION FILE NUMBER 0-17781
- -------------------------------------------------------------------------------
SYMANTEC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 77-0181864
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10201 TORRE AVENUE, CUPERTINO, CALIFORNIA 95014-2132
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (408) 253-9600
- -------------------------------------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
NONE NONE
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES /X/ NO / /
Indicate by check mark if disclosure of delinquent filer pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. /X/
Aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the Symantec common stock on
June 1, 1996 as reported on the Nasdaq National Market and with respect to
the Delrina exchangeable stock on the Toronto Stock Exchange:
$852,935,049
Number of shares outstanding of each of the registrant's classes of common
stock, including 5,272,407 shares of Delrina exchangeable stock, as of June 1,
1996:
54,124,841
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement to be delivered to stockholders in
connection with the Annual Meeting of Stockholders to be held September 25,
1996 are incorporated by reference into Part III.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
SYMANTEC CORPORATION
FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 1996
TABLE OF CONTENTS
PART I.
PAGE
--------
Item 1. Business. . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . 15
Item 3. Legal Proceedings . . . . . . . . . . . . . . . 16
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . 16
PART II.
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters . . . . . . . . 17
Item 6. Selected Financial Data . . . . . . . . . . . . 18
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . 19
Item 8. Financial Statements and Supplementary Data . . 30
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . 30
PART III.
Item 10. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . . . . 31
Item 11. Executive Compensation . . . . . . . . . . . . . 34
Item 12. Security Ownership of Certain Beneficial
Owners and Management. . . . . . . . . . . . . . 34
Item 13. Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . . . . 34
PART IV.
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K. . . . . . . . . . . . . 35
Signatures. . . . . . . . . . . . . . . . . . . . . . . . 60
<PAGE>
PART I
ITEM 1: BUSINESS.
FORWARD-LOOKING STATEMENTS.
The following discussion contains forward-looking statements that are subject
to risks and uncertainties. There are several important factors that could
cause actual results to differ materially from those anticipated by the
forward-looking statements contained in the following discussion. Readers
should pay particular attention to the risk factors set forth in this section
and in the section of this report entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
GENERAL.
Symantec Corporation ("Symantec" or the "Company") develops, markets and
supports a diversified line of application and system software products
designed to enhance individual and workgroup productivity as well as manage
networked computing environments. Approximately 85% of Symantec's net
revenues are derived from products that operate on Microsoft Corporation's
("Microsoft") MS-DOS, Windows or Windows 95 operating systems for IBM and
IBM-compatible personal computers. Symantec also offers products for use on
the Apple Macintosh and IBM OS/2 operating systems.
The Company's predecessor, C&E Software, Inc., a California corporation, and
that predecessor's operating subsidiary, Symantec Corporation, a California
corporation, were formed in September 1983 and March 1982, respectively. The
Company was incorporated in Delaware in April 1988 in connection with the
September 1988 reincorporation of the Company's predecessor and its operating
subsidiary into a single Delaware corporation.
Since Symantec's initial public offering on June 23, 1989, the Company has
completed acquisitions of the following companies:
<TABLE>
<CAPTION>
SOFTWARE OR ACTIVITY
COMPANIES ACQUIRED DATE ACQUIRED ACQUIRED
- ------------------ ------------- --------------------
<S> <C> <C>
Fast Track, Inc. ("Fast Track") May 28, 1996 Network Management Utilities
Delrina Corporation ("Delrina") November 22, 1995 Applications and Development Tools
Intec Systems Corporation ("Intec") August 31, 1994 Applications
Central Point Software, Inc. ("Central Point") June 1, 1994 Utilities
SLR Systems, Inc. ("SLR") May 31, 1994 Development Tools
Fifth Generation Systems, Inc. ("Fifth Generation") October 4, 1993 Utilities
Contact Software International, Inc. ("Contact") June 2, 1993 Applications
Certus International Corporation ("Certus") November 30, 1992 Utilities
MultiScope, Inc. ("MultiScope") September 2, 1992 Development Tools
The Whitewater Group, Inc. ("Whitewater") September 2, 1992 Development Tools
Symantec (UK) Ltd. ("Symantec UK") April 3, 1992 Marketing Entity
Zortech Ltd. ("Zortech") August 31, 1991 Development Tools
Dynamic Microprocessor Associates, Inc. ("DMA") August 30, 1991 Utilities
Leonard Development Group ("Leonard") August 30, 1991 Applications
Peter Norton Computing, Incorporated ("Norton") August 31, 1990 Utilities
</TABLE>
All of these acquisitions were accounted for as poolings of interest.
Accordingly, all financial information has been restated to reflect the
combined operations of these companies and Symantec with the exception of
Fast Track, Intec, SLR, MultiScope and Whitewater, which had results of
operations that were not material to Symantec's consolidated financial
statements.
Symantec's strategy is to develop and market products that are, or may
become, leaders in their respective categories, maintain a broad product line
across multiple operating platforms and develop and market a strong
1
<PAGE>
product offering for the enterprise or networked computing environment.
Symantec's early products were primarily productivity applications, such as
Q&A, a non-programmable database, and Time Line, a sophisticated project
management program. In 1989, Symantec expanded its business into utility
products, initially with Macintosh utilities products, and then into DOS
utilities in fiscal 1991 with the acquisition of Norton, the developer of
Norton Utilities and Norton Commander. In fiscal 1992, Symantec acquired
DMA, the developer of pcANYWHERE and in fiscal 1993, Symantec acquired
Certus, the developer of Novi, an anti-virus product that was merged into The
Norton AntiVirus. In fiscal 1992 and 1993, Symantec acquired three
development tools companies (Zortech, Whitewater and MultiScope) and expanded
its development tools business into the DOS and Windows object-oriented
programming markets. In fiscal 1994, Symantec added to its internal
development of utilities with the acquisition of Fifth Generation. Also, the
acquisition of Contact in fiscal 1994 expanded the Company's product line
with the addition of ACT!, a contact management product. The acquisition of
Central Point in fiscal 1995 added a number of desktop and enterprise utility
products to Symantec's product offerings, including Mac Tools, PC Tools,
XTree Gold and Central Point Antivirus. In fiscal 1996, the Company acquired
Delrina which strengthened the communications segment of the business with
the addition of WinFax, FormFlow and CommSuite.
During fiscal 1996, the Company sold the assets of Time Line Solutions
Corporation, a wholly-owned subsidiary, in order to focus its efforts on
Symantec's core product offerings.
The Company believes that the prevailing trends in the software industry are
movements by companies to downsize from mainframes and minicomputers to
microcomputers; a continuation of the move to more sophisticated operating
systems such as Windows 95 and Windows NT; a move to networked environments
of microcomputers; and a move to object-oriented programming among software
developers. As a result, Symantec is currently expanding its development of
network management utilities and applications that support network and
workgroup computing and is continuing its development of object-oriented
programming tools.
Symantec continually evaluates its product and corporate strategy and has in
the past and will in the future undertake organizational changes and product
and marketing strategy modifications which are designed to maximize market
penetration, maximize use of limited corporate resources and develop new
products and product channels. These frequent organizational changes
increase the risk that objectives will not be met. Further, due to the
uncertain nature of any of these undertakings, there can be no assurance that
these efforts will be successful or that the Company will realize any benefit
from these efforts.
While Symantec's diverse product line has tended to lessen fluctuations in
quarterly net revenues, such fluctuations have occurred recently and are
likely to occur in the future. These fluctuations may be caused by a number
of factors including new product introductions and product upgrades, reduced
demand for any given product, the market's transition between operating
systems (including the market's acceptance of and transition to Windows 95
which could be further influenced by Microsoft's release of a new version of
Windows NT), seasonality of retail software sales in Europe and the
transition of organizations from a desktop PC environment to an
enterprise-wide networked environment and to Internet-based applications.
Symantec has noted that various large corporate customers have decided to
postpone or forgo migrating their microcomputer operating systems to Windows
95 and may ultimately implement Windows NT or another as of yet undetermined
operating system. As a result, Symantec's future Windows 95 product revenues
could be materially adversely affected. In addition, Symantec's future net
revenues will depend on Symantec's ability to develop new products which
operate on Windows 95 and Windows NT or the operating systems that may
ultimately be accepted by the market place.
Symantec has a 52/53-week fiscal accounting year. Accordingly, all
references as of and for the periods ended March 31, 1996, 1995 and 1994
reflect amounts as of and for the periods ended March 29, 1996, March 31,
1995 and April 1, 1994, respectively.
2
<PAGE>
PRODUCTS AND SERVICES.
Symantec's products, comprising both application software and system
software, are currently organized into the following product groups: advanced
utilities, security utilities, network/communications utilities, fax, contact
management, development tools and consumer/productivity applications. The
following table summarizes Symantec's principal products by product group and
the operating system(s) on which they run:
<TABLE>
<CAPTION>
PRINCIPAL PRODUCTS OPERATING SYSTEM(S)
- ----------------------------------------- -----------------------------------------
<S> <C>
ADVANCED UTILITIES
The Norton Utilities-Registered Trademark- Windows, MS-DOS, Macintosh, PowerMacintosh
The Norton Utilities-Registered Trademark-
for Windows 95 Windows 95
The Norton Utilities-Registered Trademark-
Administrator Windows, MS-DOS, Macintosh, PowerMacintosh
The Norton Navigator-TM- for Windows 95 Windows 95
The Norton Commander-Registered Trademark- MS-DOS
The Norton Commander-Registered Trademark-
for Windows 95 Windows 95
The Norton Desktop-TM- Windows
The Norton Desktop-TM- Administrator Windows, MS-DOS, OS/2
PC Tools-Registered Trademark- Windows, MS-DOS
MacTools-Registered Trademark- Pro Macintosh, Power Macintosh
The Norton NT Tools-TM- Windows NT
SuperDoubler-TM- Macintosh, Power Macintosh
Suitcase-TM- Macintosh, Power Macintosh
XTreeGold-TM- Windows, MS-DOS
SECURITY UTILITIES
The Norton AntiVirus-Registered Trademark- MS-DOS, Windows
The Norton AntiVirus-Registered Trademark-
for NetWare Windows, MS-DOS, Macintosh
The Norton AntiVirus-Registered Trademark-
for Windows 95 Windows 95
Central Point Antivirus-TM- Windows, MS-DOS, Macintosh, OS/2
Central Point Antivirus-TM- NLM Windows, MS-DOS, Macintosh, OS/2
Symantec AntiVirus for Macintosh
(SAM-Registered Trademark-) Macintosh, Power Macintosh
Symantec AntiVirus for Macintosh
(SAM-Registered Trademark-) Administrator Macintosh, Power Macintosh
The Norton Backup-Registered Trademark- Windows, MS-DOS
The Norton DiskLock-Registered Trademark- Windows, MS-DOS, Macintosh, Power Macintosh
The Norton DiskLock-Registered Trademark-
Administrator Windows, Macintosh
The Norton Your Eyes Only-TM- Windows 95
NETWORK/COMMUNICATIONS UTILITIES
The Norton pcANYWHERE-Registered Trademark- Windows, MS-DOS
The Norton pcANYWHERE32-Registered Trademark-
for Windows 95 & NT Windows 95, Windows NT
The Norton pcANYWHERE-Registered Trademark-
Access Server OS/2
The Norton Administrator-TM-
for Networks Windows, MS-DOS, Macintosh, OS/2
The Norton Administrator-TM- Suite Windows
The Norton Administrator-TM- Suite
for Windows 95 & NT Windows 95, Windows NT
WinComm-Registered Trademark- PRO Windows
WinComm-Registered Trademark- for Windows 95 Windows 95
Delrina-Registered Trademark- CommSuite-TM- Windows
Delrina-Registered Trademark- CommSuite-TM-
for Windows 95 Windows 95
Delrina-Registered Trademark- CommSuite-TM-
for Networks Windows
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL PRODUCTS OPERATING SYSTEM(S)
- ----------------------------------------- -----------------------------------------
<S> <C>
FAX
WinFax-Registered Trademark- PRO Windows
WinFax-Registered Trademark- PRO for Windows 95 Windows 95
WinFax-Registered Trademark- PRO for Networks Windows
WinFax-Registered Trademark- Lite Windows
DosFax-Registered Trademark- Lite MS-DOS
DosFax-Registered Trademark- PRO MS-DOS
Delrina FaxPRO-TM- for Macintosh Macintosh
Delrina NET SatisFAXtion-TM- Windows
CONTACT MANAGEMENT
ACT!-Registered Trademark- Windows, MS-DOS, Macintosh,
Power Macintosh, Newton, Psion, Lotus
Notes, HP Palmtop
ACT! Mobile Link-TM- Windows
DEVELOPMENT TOOLS
Symantec-Registered Trademark- C++ Windows, MS-DOS, Macintosh, Power
Macintosh, OS/2
Symantec-Registered Trademark- C++
for Windows 95 & NT Windows 95, Windows NT
Symantec Cafe-TM- Macintosh, Power Macintosh
Symantec Cafe-TM- for Windows 95 Windows 95
FormFlow-Registered Trademark- Windows, UNIX, MS-DOS
THINK C-TM- Macintosh
CONSUMER/PRODUCTIVITY APPLICATIONS
Q&A-Registered Trademark- Windows, MS-DOS
CyberJack-TM- Windows 95
</TABLE>
ADVANCED UTILITIES
Advanced Utilities represented approximately 30% of Symantec's revenues in
fiscal 1996.
THE NORTON UTILITIES/THE NORTON UTILITIES ADMINISTRATOR are a set of "tools"
designed to address the system-level operations of the Windows, MS-DOS,
Macintosh and Power Macintosh operating systems. The Norton Utilities
product provides disk and data recovery, security, performance optimization,
system and .ini-file monitoring and preventive maintenance functions. The
Norton Utilities can restore the structure of a disk and files under certain
conditions and can also provide for file de-fragmentation, system operation
information, file unerasing and other file and system operation improvements.
The Norton Utilities Administrator is a network version of The Norton
Utilities.
THE NORTON UTILITIES FOR WINDOWS 95 is a 32-bit utility that is designed to
provide continuous system protection and includes an automated and advanced
set of data and system preparation, protection and recovery tools for Windows
95 data under Windows 95. The Norton Utilities for Windows 95 is
specifically designed to leverage Windows 95 architecture and deliver a true
32-bit utilities solution.
THE NORTON NAVIGATOR FOR WINDOWS 95 is a set of 32-bit file management tools
and desktop enhancements for Windows 95 to manage files and move around the
new desktop in Windows 95. Integrated with Windows 95, The Norton Navigator
for Windows 95 is a natural extension of the new operating system, designed
to enhance speed, functionality and operating convenience. By extending
Windows 95's basic capabilities, The Norton Navigator for Windows 95 lets
users quickly find files and programs and configure their systems to improve
productivity.
THE NORTON COMMANDER is an MS-DOS shell designed to provide a character-based
graphical approach and mouse capability for MS-DOS operations such as copy,
move and delete. The Norton Commander includes an MCI mail facility, file
compression and Commander Link and a PC-to-PC file transfer function. The
Norton Commander includes a wide range of file viewers, application launching
functions and a customizable menuing facility.
4
<PAGE>
THE NORTON COMMANDER FOR WINDOWS 95 is a 32-bit utility that is designed to
provide a character-based graphical approach and mouse capability for Windows
95 operations such as copy, move and delete. The Norton Commander for
Windows 95 includes a wide range of file viewers, application launching
functions and a customizable menuing facility. Additional features for the
Windows 95 version include a variety of network utilities and editor
associates.
THE NORTON DESKTOP/THE NORTON DESKTOP ADMINISTRATOR/PC TOOLS gives the user
easy access and maneuverability within the Windows environment by integrating
the functionality of the Windows' Program Manager and File Manager. The
Norton Desktop enables the user to access a number of integrated tools,
including The Norton Backup, The Norton AntiVirus, Deskedit,
Unerase-Registered Trademark-, Superfind-TM-, The Norton Disk
Doctor-Registered Trademark-, SmartErase-TM-, Sleeper-TM-, Batch Builder-TM-,
Keyfinder-TM- and Icon Editor. From the integrated file manager, the user
can also launch, copy, move, view and delete a file or application by
clicking and dragging icons on the desktop. The Norton Desktop Administrator
is a network version of The Norton Desktop. PC Tools includes
CrashGuard-TM-, System Consultant-TM-, File Companions-TM-,
INI-Consultant-TM-, AutoSync-TM-, DiskFix-Registered Trademark- and Optimizer.
MACTOOLS PRO is a disk utility program that uses innovative software
technology to provide a simple and accessible user interface under the
Macintosh and Power Macintosh operating systems. MacTools Pro includes
Optimizer, Trashback, MacTools Clinic, DiskFix-Registered Trademark-,
FileFix-TM-, Backup, Undelete, Autocheck and FastCopy-TM-.
THE NORTON NT TOOLS is a set of utilities that combines anti-virus
protection, powerful file management and the ability to monitor key system
resources under the Windows NT operating system. Key features include
real-time system monitoring and status with System Doctor and System
Information, protection against viruses on the desktop and over the Internet
and automatic alert notification of virus definition updates.
SUPERDOUBLER automatically and transparently increases hard disk space for
the Macintosh and Power Macintosh operating systems through file compression.
SuperDoubler includes accelerated background copying and deleting for the
Macintosh and Power Macintosh operating systems.
SUITCASE is a resource management tool for the Macintosh and Power Macintosh
operating systems. Suitcase helps organize and access font, DA, sound and
FKEY resources.
XTREEGOLD is a full featured file manager for MS-DOS and Windows which
includes full keystroke capability in order to take advantage of its powerful
shortcuts.
SECURITY UTILITIES
Security Utilities represented approximately 25% of Symantec's revenues in
fiscal 1996.
THE NORTON ANTIVIRUS/THE NORTON ANTIVIRUS FOR NETWARE/THE NORTON ANTIVIRUS
FOR WINDOWS 95/CENTRAL POINT ANTIVIRUS/CENTRAL POINT ANTIVIRUS NLM/SYMANTEC
ANTIVIRUS FOR MACINTOSH (SAM) are programs for the protection, detection and
elimination of computer viruses under the MS-DOS, Windows, Windows 95,
Macintosh, Power Macintosh and OS/2 operating systems. They provide virus
protection, detection and repair capability, recognize virus-like behavior
and prevent most known or unknown viruses from infecting a system. They
detect viruses and disinfect infected files and disks during normal computer
use. They also detect and disinfect floppy boot-track viruses, stealth and
encrypted viruses and remove active viruses from memory. The Norton
AntiVirus for Windows 95 is a full 32-bit virus protection product
specifically designed for Windows 95. The Norton AntiVirus for Windows 95
supports the Windows 95 interface and is designed to prevent viruses with a
unique, comprehensive, multi-layered line of defense that combines scanning,
virus sensing and inoculation. The Norton AntiVirus is also available for
Novell's operating system as a NetWare Loadable Module ("NLM") and is known
as The Norton AntiVirus for NetWare. The NLM can scan MS-DOS, Windows and
Macintosh file types.
SYMANTEC ANTIVIRUS FOR MACINTOSH (SAM) ADMINISTRATOR is an application which
provides centralized network distribution and maintenance of the Symantec
AntiVirus for Macintosh. Its configurable network installation and upgrade
capabilities enable administrators to protect remote networked Macintosh
systems.
THE NORTON BACKUP is a hard disk backup program. The Norton Backup provides
automatic program installation and configuration, point and shoot file
selection and user-level options. Both a MS-DOS and Windows version of the
product is available.
THE NORTON DISKLOCK protects PC and Macintosh computers from unwanted
intrusion. The Norton DiskLock provides boot protection to prevent
unauthorized users from accessing a PC's hard disk drive. In addition to
full
5
<PAGE>
disk access control, The Norton DiskLock allows for basic password protection
and selective locking to secure individual files or folders in a shared
environment. It also provides SpeedCrypt for especially sensitive data and
is available in MS-DOS, Windows, Macintosh and Power Macintosh versions.
THE NORTON DISKLOCK ADMINISTRATOR makes it easy to configure, distribute and
monitor workstation security from one central location as well as configure
and distribute security for all Macintoshes on the network remotely. It also
gathers the audit logs for each workstation so security can be monitored from
one central database.
THE NORTON YOUR EYES ONLY offers comprehensive 32-bit security designed
specifically for the Windows 95 operating system, "on-the-fly" automatic
encryption using RSA's public key encryption technology, optional access
control during boot-up to prevent unauthorized access to data on the hard
disk, configurable automatic time-out blanking of screen if the computer
system is idle for a specified period of time and the administrator version
provides configuration, distribution and management for an entire network
from a central location
NETWORK/COMMUNICATIONS UTILITIES
Network/Communications Utilities represented approximately 20% of Symantec's
revenues in fiscal 1996.
THE NORTON PCANYWHERE offers reliable, fast and flexible PC-to-PC remote
computing via serial or modem connection. The Norton pcANYWHERE lets the
user remotely control one PC from the keyboard of another PC. The offsite
remote PC, laptop or PC terminal controls the operation of the distant host
PC. The software allows the user to run any MS-DOS or Windows application
remotely, transfer files and perform other data operations. In addition to
allowing a remote user to run a distant PC, The Norton pcANYWHERE optionally
allows users at the host (distant) machine to view the operations being
conducted from the remote site. This makes The Norton pcANYWHERE ideal for
support of users as a remote helpdesk function for both problem solving and
application training.
THE NORTON PCANYWHERE32 FOR WINDOWS 95 & NT is a full 32-bit remote computing
product specifically designed for Windows 95 and Windows NT. The Norton
pcANYWHERE32 allows a user, from any location, to quickly and easily access
applications and from any Windows 95, Windows NT or DOS environment.
THE NORTON PCANYWHERE ACCESS SERVER allows network administrators to
centrally manage multiple remote control sessions. The Norton pcANYWHERE
Access Server provides mobile users with simple, efficient and secure access
to networks.
THE NORTON ADMINISTRATOR FOR NETWORKS is a single solution to reduce network
management costs substantially through the automation of key manually
intensive local area network (LAN) administration tasks. Its key features
include full integration of hardware and software inventory, software
distribution, license monitoring and metering and the automation of costly
LAN administration tasks. The Norton Administrator for Networks supports
major operating systems and provides the ability to add in The Norton
AntiVirus, The Norton pcANYWHERE remote control technology, The Norton
Utilities Administrator and The Norton DiskLock Administrator.
THE NORTON ADMINISTRATOR SUITE/THE NORTON ADMINISTRATOR SUITE FOR WINDOWS 95
& NT is a comprehensive, cost-effective solution for companies managing a LAN
with less than 1,000 nodes. Its key features include hardware and software
metering and distribution, desktop virus protection, desktop configuration
management and remote control. The Norton Administrator Suite is compatible
with Windows, Windows 95 and Windows NT.
WINCOMM PRO for Windows features predefined links to popular on-line
services, including MCI Mail, CompuServe, GEnie and AT&T Mail and can be used
to connect to bulletin boards, mainframes and remote PCs. WinComm PRO
incorporates a powerful scripting language that allows users to completely
customize and automate communications sessions and features an on-line virus
detector that checks for over 300 common viruses as files are downloaded.
WINCOMM FOR WINDOWS 95 allows users to connect to hundreds of bulletin board
systems and popular on-line services such as CompuServe. It supports the most
popular file transfer protocols, terminal emulations and modems. WinComm for
Windows 95 includes user definable columns and rows, support for sound and a
graphical interface format viewer to view files as they are downloaded.
Other features include virus detection, a host mode, a Backscroll Buffer,
split screen capability and a PKZIP manager to conserve valuable disk space.
DELRINA COMMSUITE for Windows is a retail product that includes both WinFax
PRO and WinComm PRO, integrating fax and data communications functionality.
Delrina CommSuite allows both fax communications and data
6
<PAGE>
communications software to address the same fax modem hardware without the
technical difficulties that normally occur when fax and communications
software are operated simultaneously.
DELRINA COMMSUITE FOR WINDOWS 95 combines WinFax PRO, WinComm PRO, Cyberjack
and TalkWorks into one economical suite. Specifically designed for Windows
95, the suite enables users to perform true multitasking and multithreading,
allowing them to send and receive faxes, voice mail, e-mail and pager
messages completely in the background. Other features include drag and drop
interface, easy-to-use help wizards, long filenames, MAP/TAPI support and
UNIMODEM. Delrina CommSuite for Windows 95 is compatible with Microsoft
Exchange and enables users to send and receive Internet e-mail. It provides
voice and telephone capabilities that enable a PC to perform as a
full-featured answering machine and advanced telephone. Finally, Delrina
CommBar provides users instant access to the status of all communications
activities.
DELRINA COMMSUITE FOR NETWORKS is the network version of Delrina CommSuite
and combines the network version of WinFax PRO with a network version of
WinComm PRO. This product allows network users to utilize the same fax modem
hardware for both network faxing and network data communications.
FAX
Fax represented approximately 10% of Symantec's revenues in fiscal 1996.
WINFAX PRO for Windows contains features and enhancements, including a
streamlined drag-and-drop interface, a "customizable" phone book and an
enhanced viewer which enables users to "clean up" faxes or quickly rotate any
faxes that have been received upside down. WinFax PRO combines advanced
faxing features such as functionality for mobile users and integration with
popular e-mail systems. The fourth generation of WinFax PRO also includes
binary file transfer and "Microsoft at Work" capability which enables users
with a class 1 modem to transmit not just images of documents but the actual
working files themselves.
WINFAX PRO FOR WINDOWS 95 allows users to send, receive and manage faxes in
Windows 95. WinFax PRO for Windows 95 provides background faxing, which
allows users to continue working on other applications while sending a fax
and enhanced file compression, which increases the speed at which faxes are
transmitted. Other features include "Delrina Pager," which allows a computer
to page a user to alert him or her of incoming voice and fax messages and
"call identify," which allows a user to view the incoming fax or phone number
on the user's computer screen before answering the phone. In order to use
the call identify feature of WinFax PRO for Windows 95, users must subscribe
to their local telephone company's service.
WINFAX PRO FOR NETWORKS is the network version of WinFax PRO. While LANs
have become widespread in many organizations, the Company believes that only
a small percentage of this installed base has a network fax system. WinFax
PRO for Networks is a cost-effective, flexible and expandable solution that
provides multi-user access to a network's fax modem resources in an efficient
and controlled fashion. WinFax PRO for Networks is designed to work with
popular network operating systems, including Novell NetWare, Novell NetWare
Lite, Artisoft LANtastic and Microsoft Windows for Workgroups, without the
need for a dedicated fax server. In addition, WinFax PRO for Networks offers
comprehensive support for the most common e-mail packages, enabling users to
receive faxes directly to their e-mail address.
WINFAX LITE AND DOSFAX LITE are OEM versions of the retail fax software
products for Windows and DOS users, respectively, and have been bundled by
over 100 PC and fax modem manufacturers and software vendors. These products
offer basic fax functionality and can be upgraded to full-featured retail
products.
DOSFAX PRO AND DELRINA FAXPRO FOR MACINTOSH are the DOS and Macintosh
versions, respectively of WinFax PRO. These products allow users to send,
receive and manage all fax activities without interruption.
DELRINA NET SATISFAXTION is a network fax product focused on the larger
corporate marketplace. While WinFax PRO for Networks focuses on the
workgroup or departmental level, Delrina NET SatisFAXtion is focused on the
enterprise. Delrina NET SatisFAXtion provides enterprise users with the same
capabilities as WinFax PRO for Networks. Requiring a dedicated fax server
computer, NET SatisFAXtion delivers security, auditing and detailed billing
features required in the enterprise environment.
7
<PAGE>
CONTACT MANAGEMENT
Contact Management represented approximately 10% of Symantec's revenues in
fiscal 1996.
ACT! is an easy-to-use contact database with a graphical activity schedule, a
full-featured word processor and a report generator. ACT! manages and
integrates a user's contacts, calendar and communication through the use of
integrated e-mail messaging. ACT! runs on the Windows, MS-DOS, Macintosh,
Newton, Psion, Lotus Notes and HP Palmtop operating systems.
ACT! MOBILE LINK is an add-on product to ACT! for Windows. ACT! Mobile Link
automates communication between individuals in the office and mobile
professionals by providing the ability to remotely access and exchange
contact information. It supports data maintained centrally as well as using
e-mail to synchronize two or more users of the same database and calendar.
DEVELOPMENT TOOLS
Development Tools represented approximately 5% of Symantec's revenues in
fiscal 1996.
SYMANTEC C++ is a set of professional programming tools for C++ and provides
support for developing MS-DOS, Windows, Macintosh, Power Macintosh and OS/2
applications. The MS-DOS and Windows versions include enhanced 32-bit
development support, including 32-bit Microsoft Foundation Classes on CD-ROM.
It supports full template debugging and features a hierarchical project
management system with full dependency tracking. The Macintosh version
includes a new version of THINK Class Library (TLC 2.0), which allows
developers to write applications that are portable to PowerPC
microprocessor-based Macintoshes. Symantec C++ for Macintosh also includes
Bedrock exception-handling and THINK Inspector that allows quick debugging.
SYMANTEC C++ FOR WINDOWS 95 & NT is a powerful development system that
provides tools for developing applications for Windows 95 and Windows NT.
Symantec C++ for Windows 95 and Windows NT provides the user with a way to
architect, navigate, build and debug Windows 95 and Windows NT applications.
SYMANTEC CAFE for the Macintosh and Power Macintosh systems is a way to
create Java applications and applets that add dynamic functionality to World
Wide Web pages. It features a native Java compiler that allows builds of
Java programs. Symantec Cafe also includes a full suite of integrated tools
for Java Development, including a project manager, editor, browser, graphical
debugger and applet viewer.
SYMANTEC CAFE FOR WINDOWS 95 features a native Java compiler that allows
builds of Java programs. It provides a Class Browser, an introduction to
Java programming book and over 35 sample applets that help developers get
started quickly using Java in their web pages. In addition, Symantec Cafe
for Windows 95 provides a fully integrated graphical debugger for Java,
allowing developers to do source level debugging of their Java standalone
applications or applets that are embedded inside an HTML web page.
FORMFLOW is a LAN-based workflow automation product that works in a
heterogeneous enterprise environment supporting multi-vendor e-mail,
operating systems and databases. FormFlow is unique in using the binary file
transfer capabilities of WinFax PRO to enable users to send actual data files
rather than the traditional bitmap images normally associated with
conventional faxing. As a result, customers are currently able to create
viable and affordable alternative electronic communications solutions. The
product supports leading network-based e-mail systems, including Microsoft
Mail, Lotus cc:Mail and Notes and Banyan eMail. FormFlow also comes with a
tracking application to let users keep up-to-date on the status of the forms
routed across the network.
THINK C provides users with an integrated set of tools, including a C
compiler, to develop software in C for the Macintosh. The product consists
of five main components: a text editor that allows a programmer to enter and
modify text files of statements in human-readable C programming language
(source code); a compiler that translates files of statements in C source
code into binary instruction modules that a computer can execute (object
code); a linker that enables separate object code modules to be combined to
form a complete program; a source level debugger to support the testing of
software while it is being developed; and a project manager that automates
the management of all of these processes.
8
<PAGE>
CONSUMER/PRODUCTIVITY APPLICATIONS
Consumer/Productivity Applications represented less than 5% of Symantec's
revenues in fiscal 1996.
Q&A for Windows and DOS is an easy-to-use, integrated database management and
word processing program with sophisticated report generation capabilities.
Q&A also has a natural language interface that allows the user to request
reports from a database using plain English sentences instead of database
commands.
CYBERJACK organizes the Internet into a manageable and usable information
resource through its Guidebook technology and full complement of Internet
tools. It is fully integrated with Windows 95 and provides users with
full-featured client applications, including a Web browser, USENet News
reader, FTP file transfer, Internet chatting sessions, e-mail via Microsoft
Exchange, search capabilities with Gopher and Archie and Image and Zip
managers with built-in Norton AntiVirus.
SALES, INTERNATIONAL SALES AND CUSTOMER SUPPORT. Symantec markets its
products worldwide utilizing a multi-channel strategy of direct sales and
indirect sales through independent software distributors, major retail chains
and resellers.
SALES
Symantec utilizes a direct sales force that encourages end users to adopt
Symantec's products as corporate standards. The direct sales force focuses
primarily on site license sales where a license for multiple workstations is
sold to a customer at a negotiated price. The sales cycle with respect to
site license sales may be lengthy and may be subject to integration and
acceptance by the customer. The Company also employs an indirect sales force
that works closely with its major distributor and reseller accounts to manage
the flow of orders, inventory levels and sell-through to retail chains as
well as promotions and other selling activities. At March 31, 1996, Symantec
had approximately 130 people in its direct and indirect sales force.
Symantec maintains distribution relationships with major independent
distributors. These distributors stock Symantec's products in inventory for
redistribution to independent dealers, consultants and other resellers.
Symantec also maintains relationships with major retailers, including
CompUSA, Computer City and Egghead Discount Software. Symantec markets to
these retailers either directly or through independent distributors.
Additionally, Symantec sells product upgrades and certain of its products to
end users through direct mail campaigns.
Approximately 37% of Symantec's net revenues in the year ended March 31, 1996
were derived from Symantec's two largest distributors. Ingram Micro D
represented 27%, 22% and 18% of Symantec's net revenues in fiscal 1996, 1995
and 1994, respectively, while Merisel represented 10%, 11% and 13% of
Symantec's net revenues in fiscal 1996, 1995 and 1994, respectively.
Agreements with distributors are generally nonexclusive and may be terminated
by either party without cause. Such distributors are not within the control
of Symantec, are not obligated to purchase products and may also represent
other vendors' product lines. There can be no assurance that these
distributors will continue their current relationships with Symantec on the
same basis, or that they will not give higher priority to the sale of other
products, which could include products of competitors. Additionally, certain
distributors and resellers have experienced financial difficulties in the
past. There can be no assurance that distributors that account for
significant sales of the Company will not experience financial difficulties
in the future. Any such problems could lead to reduced sales and could
adversely affect operating results of the Company. There can be no assurance
that Symantec will be able to continue to obtain adequate distribution
channels for all of its products in the future.
Symantec's return policy allows its distributors, subject to certain
limitations, to return purchased products in exchange for new products or for
credit towards future purchases. End users may return products through
dealers and distributors within a reasonable period from the date of purchase
for a full refund, and retailers may return older versions of products.
Various distributors and resellers may have different return policies that
may negatively impact the level of products which are returned to Symantec.
Product returns occur when the Company introduces upgrades and new versions
of products or when distributors order too much product. In addition,
competitive factors often require the Company to offer rights of return for
products that distributors or retail stores are unable to sell. Symantec has
experienced, and may experience in the future, significant increases in
product returns above historical levels from customers of acquired companies
after an acquisition is completed. Symantec prepares detailed analyses of
historical return rates when estimating anticipated returns and maintains
reserves for product returns. In addition to detailed historical return
rates, the Company's estimation of return reserves takes into consideration
upcoming product upgrades, current market conditions, customer inventory
balances and any other
9
<PAGE>
known factors that could impact anticipated returns. Based upon returns
experienced, the Company's estimates have been materially accurate. The
impact of actual returns on net revenues, net of such provisions, has not had
a material effect on the Company's liquidity as the returns typically result
in the issuance of credit towards future purchases as opposed to cash
payments to the distributors. However, there can be no assurance that future
returns will not exceed the reserves established by the Company or that
future returns will not have a material adverse effect on the operating
results of the Company.
Symantec's marketing activities include advertising in trade, technical and
business publications, cooperative marketing with distributors, resellers and
dealers, periodic direct mailings to existing and prospective end users and
participation in trade and computer shows. Additionally, the Company
typically offers two types of rebate programs, volume incentive rebates and
rebates to end users. Volume incentive rebates are made available to
Symantec's largest distributors and resellers whereby the distributor or
reseller earns a rebate based upon their purchases or the volume of product
they sell to end users. Volume incentive rebates are accrued when revenue is
recorded. The amount of these rebates as a percentage of net revenues has
been consistent for all periods presented and has not had a material impact
on the Company's liquidity. The Company also offers rebates from time to
time to end users who purchase the Company's products. End user rebates are
accrued when revenue is recorded. These end user rebates have been offered
on a limited basis and have not been material to the Company's results of
operations or liquidity in fiscal 1996, 1995 or 1994.
INTERNATIONAL SALES
International revenues represented approximately 32%, 31% and 29% of
Symantec's net revenues in fiscal 1996, 1995 and 1994, respectively. At
March 31, 1996, Symantec had approximately 125 sales, marketing and related
personnel in its international sales organization.
The majority of Symantec's net revenues from certain European regions are
derived from sales by affiliates of Symantec's major United States
distributors. In other countries, Symantec sells its products through
authorized distributors. In some countries, these distributors are
restricted to specified territories. Symantec typically adapts products for
local markets, including translating the documentation and software where
necessary, and prepares comprehensive marketing programs for each local
market.
Symantec has established marketing offices in Australia, Brazil, Canada,
France, Germany, Holland, Hong Kong, Italy, Japan, Mexico, New Zealand,
Russia, Singapore, Sweden, Switzerland, Taiwan and the United Kingdom. These
local offices facilitate Symantec's marketing and distribution in
international markets. The Company's international operations are subject to
certain risks common to international operations, such as government
regulations, import restrictions, currency fluctuations, repatriation
restrictions, seasonality in the retail software market in Europe and, in
certain jurisdictions, reduced protection for the Company's copyrights and
trademarks. Information with respect to international operations and export
sales may be found in Note 12 of the Notes to Consolidated Financial
Statements in Part IV, Item 14 of this Form 10-K.
CUSTOMER SUPPORT
During the quarter ended March 31, 1994, Symantec introduced a new product
support program that provides a wide variety of free and fee-based technical
support services to its customers. Symantec provides its customers with free
support via electronic and automated services as well as 90 days
complimentary free telephone support for selected products. Symantec accrues
the cost of providing this free support at the time of product sale. In
addition, Symantec offers both individual users and corporate customers a
variety of fee-based options designed to meet their individual technical
support requirements. Fee-based technical support services did not generate
material revenues in fiscal 1996, 1995 or 1994 and are not expected to
generate material revenues in the near future.
PRODUCT DEVELOPMENT AND ACQUISITIONS.
Symantec uses a multiple products sourcing strategy that includes internal
development, acquisitions of product lines or companies and licensing from
third-parties. Development of new products and enhancement of existing
products are typically performed by Symantec in individual product groups.
Each group's responsibilities include design, development, documentation and
quality assurance. Outside contractors are used for certain aspects of the
product development process.
Symantec uses strategic acquisitions, as necessary, to provide certain
technology and products for its overall product strategy. The Company has
completed a number of acquisitions of companies and products and expects to
acquire
10
<PAGE>
other companies and products in the future. In addition to the significant
business risks associated with acquisitions, which include the successful
combination of the companies in an efficient and timely manner, the
coordination of research and development and sales efforts, the retention of
key personnel and the integration of the acquired products, Symantec
frequently incurs significant acquisition expenses for legal, accounting and
financial advisory services and other costs related to the combination of the
companies. In the past these costs have had, and may, with respect to
possible future acquisitions have, a significant adverse impact on the
Company's profitability and financial resources. There can be no assurance
that any of the Company's acquisitions will be successfully assimilated into
the Company's operations. In addition, the comparison of future Company
revenues, expenses and profitability to historical revenues, expenses and
profitability on a pooled basis may be adversely impacted by the elimination
of duplicative products and operating activities.
The Company is devoting substantial efforts to the development of software
products that are designed to operate on Windows 95 and Windows NT, as well
as the development of products for networked operating environments and
network management. Due to the inherent uncertainties of software
development projects, there can be no assurance that any products currently
being developed by Symantec will be technologically successful, that any
resulting products will achieve market acceptance or that the Company will be
effective in competing with products currently in the market. There can also
be no assurance that Symantec will elect to develop software products for the
operating environments that ultimately are accepted by the marketplace,
including Windows 95 and Windows NT. Development for networked operating
environments is more complex than development for the desktop and requires a
higher level of research and development expenditures. As a consequence of
the complexity of developing products for networked operating environments
and operating systems using graphical user interfaces and Symantec's emphasis
on technical excellence, Symantec has experienced delays in the development
and delivery of its products and is likely to experience such delays in the
future. Although such delays have undoubtedly had a material adverse effect
on Symantec's business, Symantec is not able to quantify the magnitude of net
revenues that were deferred or lost as a result of any particular delay
because Symantec is not able to predict the amount of net revenues that would
have been obtained had the original development expectations been met. Due
to the inherent uncertainties of software development projects, Symantec does
not generally disclose or announce the specific expected shipment date of the
Company's product introductions.
Symantec's total research and development expenses were approximately $94.7
million, $70.7 million and $68.1 million in fiscal 1996, 1995 and 1994,
respectively. Research and development expenditures are charged to
operations as incurred. The increase in research and development expenses in
fiscal 1996 was principally due to the development of products for the
Windows 95 operating system. Financial accounting rules requiring
capitalization of certain software development costs have not materially
affected the Company, except for amounts capitalized by Delrina prior to its
acquisition by Symantec. Delrina did not capitalize any software development
costs in fiscal 1996 and capitalized $6.3 million and $2.6 million in
software development costs in fiscal years 1995 and 1994, respectively. The
related amortization expense was $5.6 million, $4.0 million and $1.9 million
in fiscal 1996, 1995 and 1994, respectively.
Elements of certain Company products are licensed from third-party developers.
COMPETITION.
The microcomputer software market is intensely competitive and is subject to
rapid changes in both technology and the strategic direction of major
microcomputer hardware manufacturers and operating system providers. The
Company's competitiveness depends on its ability to enhance its existing
products and to offer new products on a timely basis. The Company has more
limited resources than certain of its competitors and must restrict its
product development efforts to a relatively small number of projects.
Further, the Company has less experience in the enterprise/network market
than many of it competitors and fewer relationships and less experience with
systems integrators and other third-party vendors that provide consulting and
implementation services necessary to sell many of these products.
Price competition is significant in the microcomputer business software
market and may continue to increase and become even more significant in the
future, resulting in reduced profit margins. Site and enterprise-wide
licensing (permitting large volume customers to copy a program and its
documentation for use within a particular site or within an enterprise at
discounted prices), discount pricing for large volume distributors and
retailers, product bundling promotions (whereby multiple products of one or
more vendors are bundled and sold together at a price significantly
11
<PAGE>
more attractive to the purchaser than buying each product separately) and
competitive upgrade programs are forms of price competition that have become
more prevalent. Additionally, should competitive pressures in the industry
increase, Symantec may have to increase its spending on sales and marketing
as a percentage of net revenues, resulting in lower profit margins.
With the introduction of Microsoft's Windows 95 and Windows NT operating
systems, the Company's ability to generate revenue from many of its current
products will depend on its ability to develop new versions and enhancements
of those products in a timely manner for the Windows 95 and Windows NT
operating systems and/or other operating systems that may gain market
acceptance. The Company has experienced delays in the development and
delivery of its products and may experience such delays in the future, which
would result in a loss of competitiveness of the Company's products and could
adversely affect the Company and its financial results.
Operating system vendors such as Microsoft have added features to new
versions of their products that provide some of the same functionality
traditionally offered in Symantec's utility products. Symantec believes this
trend may continue. Microsoft may incorporate advanced utilities and other
features in future versions of Windows 95, Windows NT or other operating
systems that may decrease the demand for certain of the Company's products,
including those currently under development. A number of software developers
have integrated antivirus capabilities into their internet products. While
Symantec plans to continue to improve its utility products with a view toward
providing enhanced functionality over what may be provided in operating
systems, there is no assurance that these efforts will be successful or that
such improved products will be accepted by software users. Symantec will
also attempt to work with operating system vendors in an effort to make its
utility products compatible with those operating systems, yet differentiate
those utility products from features included in the operating systems.
However, there is no assurance that these efforts will be successful.
Because of the breadth of its product line, the Company competes with at
least one product from many of the major independent software vendors,
including Borland International, Inc. ("Borland"), DataStorm, Inc.
("DataStorm"), DCA, Inc. ("DCA"), ELAN Software Corporation ("ELAN"),
International Business Machines Corporation ("IBM"), Intel Corporation
("Intel"), JetForm Corporation ("JetForm"), McAfee Associates, Inc.
("McAfee"), Microcom, Inc. ("Microcom"), Microsoft Corporation ("Microsoft"),
Norton-Lambert Corporation ("Norton-Lambert"), Novell, Inc. ("Novell"),
Phoenix Technologies Ltd. ("Phoenix"), TouchStone Software Corporation
("TouchStone"), Traveling Software, Inc. ("Traveling Software"), Starfish
Software, Inc. ("Starfish") and SofNet, Inc. ("SofNet").
For example, The Norton Administrator for Networks competes with Microsoft
System Management Server from Microsoft and LanDesk from Intel. The Norton
Utilities and The Norton Backup compete with operating systems, such as
Microsoft's MS-DOS, IBM's DOS and Novell's DR-DOS, which offer file recovery,
anti-virus and backup features as well as products from independent utilities
vendors. The Norton AntiVirus and Central Point Antivirus compete with
PC-cillin 95 from TouchStone and Viruscan from McAfee. Symantec's The Norton
pcANYWHERE competes mainly with Laplink from Traveling Software, Carbon Copy
from Microcom, Close Up from Norton Lambert and NetRemote from McAfee. ACT!
competes with Lotus Organizer for Windows from IBM, GoldMine from ELAN,
Sidekick from Starfish and many other personal information managers produced
by various software developers. Symantec C++ competes with C++ compilers
from Borland and Microsoft. The Norton Desktop for Windows and PC Tools for
Windows compete with Dashboard from Starfish. Delrina WinFax PRO competes
with products offered by Phoenix, Traveling Software and SofNet, as well as
Microsoft's Windows 95 operating system. WinComm and Delrina CommSuite
compete with DataStorm's ProComm and DCA, Inc.'s Crosstalk. FormFlow
competes with products offered by JetForm, Novell, IBM and Microsoft. In
addition, these and other Company products compete less directly with a
number of other products that offer levels of functionality different from
those offered by Symantec's products or that were designed for a somewhat
different group of end users.
Symantec also competes with microcomputer hardware manufacturers that develop
their own software products. Further, Symantec competes with other
microcomputer software companies for access to the channels of retail
distribution and for the attention of customers at the retail level and in
corporate accounts. Finally, Symantec competes with other software companies
in its efforts to acquire products or companies and to publish software
developed by third parties. Symantec believes that, in the next few years,
competition in the industry will intensify as most major software companies
expand their product lines into additional product categories. Some of the
Company's competitors have substantially greater financial, marketing and
technological resources than Symantec.
12
<PAGE>
Due to the rapid change in software distribution technology as demonstrated
by the increase in software distributed through the Internet, there can be no
assurance that Symantec will be able to develop an effective method of
distributing its software products utilizing each of the available
distribution channels or that Symantec will develop distribution channels for
those channels which are ultimately accepted by the marketplace. The
presence of new channels could adversely impact existing channels and/or
product pricing, which could have a material adverse impact on the Company's
net revenues as the Company moves to new channels.
MANUFACTURING AND BACKLOG.
Symantec's product development organization produces a set of master
diskettes and documentation for each product. Most of Symantec's domestic
manufacturing is performed by outside contractors under the supervision of
Symantec's manufacturing organization. Purchasing of most raw materials and
fulfillment of most orders is done by Symantec personnel in Symantec's
Sunnyvale, California facility. The manufacturing steps that are
subcontracted to outside organizations include the duplication of diskettes
and CD-ROM's, printing of documentation materials and assembly of the final
package. Symantec performs diskette duplication and assembly of the final
package in its Dublin, Ireland manufacturing facility for most products
distributed outside of the United States, Canada and Latin America.
Symantec is often able to acquire materials on a volume-discount basis and
has multiple sources of supply for certain materials. To date, Symantec has
not experienced any material difficulties or delays in production of its
software and related documentation and packaging. However, shortages may
occur in the future. For example, shortages of certain materials may occur
when Microsoft introduces new operating systems.
Symantec normally ships products within one week after receiving an order.
Thus, Symantec does not consider backlog to be a significant indicator of
future performance.
PRODUCT PROTECTION.
Symantec regards its software as proprietary and relies on a combination of
copyright, patent and trademark laws and license agreements in an attempt to
protect its rights. Despite these precautions, it may be possible for
unauthorized third parties to copy aspects of Symantec's products or to
obtain and use information that Symantec regards as proprietary. All of
Symantec's products are protected by copyright, and Symantec has several
patents and patent applications pending. However, existing patent and
copyright laws afford limited practical protection. In addition, the laws of
some foreign countries do not protect Symantec's proprietary rights in its
products to the same extent as do the laws of the United States. Symantec's
products are not copy protected.
As the number of software products in the industry increases and the
functionality of these products further overlap, Symantec believes that
software developers will become increasingly subject to infringement claims.
This risk is potentially greater for companies, such as Symantec, that obtain
certain of their products through publishing agreements or acquisitions,
since they have less direct control over the development of those products.
In addition, an increasing number of patents are being issued that are
potentially applicable to software, and allegations of patent infringement
are becoming increasingly common in the software industry. It is impossible
to ascertain all possible patent infringement claims because new patents are
being issued continually, the subject of patent applications is confidential
until a patent is issued, and it may not be apparent even from a patent that
has already been issued whether it is potentially applicable to a particular
software product. This increases the risk that Symantec's products may be
subject to claims of patent infringement. Although such claims may
ultimately prove to be without merit, they are time consuming and expensive
to defend. Symantec has been involved in disputes claiming patent
infringement in the past and may be involved in such disputes in the future.
If Symantec is alleged to infringe one or more patents, it may choose to
litigate the claim and/or seek an appropriate license. If litigation were to
commence, a license were not available on reasonable terms or if another
party were found to have a valid patent claim against Symantec, it could have
a material adverse effect on Symantec.
SEASONALITY.
While Symantec's diverse product line has tended to lessen fluctuations in
quarterly net revenues, these fluctuations have occurred recently and are
likely to occur in the future. These fluctuations may be caused by a number
of factors, including the timing of announcements and releases of new or
enhanced versions of its products and product upgrades, the introduction of
competitive products by existing or new competitors, reduced demand for any
given product, seasonality in the retail software market in Europe, the
market's transition between operating systems
13
<PAGE>
and the transition from a desktop PC environment to an enterprise-wide
environment. These factors may cause significant fluctuations in net
revenues and, accordingly, operating results.
EMPLOYEES.
As of March 31, 1996, Symantec employed approximately 2,200 people, including
1,100 in sales, marketing and related staff activities, 700 in product
development and 400 in management, manufacturing, administration and finance.
None of the employees is represented by a labor union, and Symantec has
experienced no work stoppages. Symantec believes that its employee relations
are good.
Competition in recruiting personnel in the software industry is intense.
Symantec believes that its future success will depend in part on its ability
to recruit and retain highly skilled management, marketing and technical
personnel.
14
<PAGE>
ITEM 2:PROPERTIES.
Symantec's principal locations, all of which are leased, are as follows:
<TABLE>
APPROXIMATE EXPIRATION
SIZE OF
LOCATION PURPOSE (IN SQUARE FEET) LEASE
- ------------------- -------------------- --------------- ----------
<S> <C> <C> <C>
NORTH AMERICA
Cupertino, California
Corporate Headquarters Administration, sales and marketing 87,000 1998
Development Tools and
Contact Management Research and development 57,000 2000
Sunnyvale, California Manufacturing 78,000 1998
Santa Monica, California Research and development and marketing 81,000 2000
Santa Monica, California Research and development 31,000 2000
Bedford, Massachusetts Research and development and marketing 13,000 2000
Eugene, Oregon Customer service and technical support 167,000 2000
Beaverton, Oregon Research and development and marketing 51,000 1997
Huntington, New York Research and development and marketing 11,000 2000
St. Louis, Missouri Research and development 3,000 1996
Toronto, Canada Research and development, marketing 74,000 2005
and technical support
INTERNATIONAL
Leiden, Holland Administration, sales and marketing 15,000 1997
and technical support
Dublin, Ireland Administration, manufacturing 44,000 2026
and translations
</TABLE>
Symantec's principal administrative and sales and marketing facility, as well
as certain research and development and support facilities, are located in
Cupertino, California. The Company leases a number of additional facilities
for marketing and research and development in the United States and for
marketing in Europe, Australia, New Zealand, Singapore, Hong Kong, Japan and
Canada. Symantec believes its facilities are adequate for its current needs
and additional or substitute space will be available as needed to accommodate
any expansion of its operations.
15
<PAGE>
ITEM 3: LEGAL PROCEEDINGS.
Information with respect to this Item may be found in Note 11 of Notes to
Consolidated Financial Statements in Part IV, Item 14 of this Form 10-K.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On approximately March 26, 1996, the Company's stockholders were sent a proxy
statement requesting a vote on approval of the 1996 Equity Incentive Plan
(the "Plan"). (See Note 8 of Notes to Consolidated Financial Statements in
Part IV, Item 14 of this Form 10-K). The Plan was approved by the
stockholders at a special meeting held at Symantec's headquarters on May 14,
1996. 20,950,968 shares were voted for approval of the Plan, 17,117,901
shares were voted against approval of the Plan, and 167,155 shares abstained
from voting.
16
<PAGE>
PART II
ITEM 5:MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Symantec's common stock has been traded on the Nasdaq National Market
under the Nasdaq symbol "SYMC" since the Company's initial public offering on
June 23, 1989. The high and low closing sales prices set forth below are as
reported on the Nasdaq National Market.
<TABLE>
<CAPTION>
Fiscal 1996 Fiscal 1995
----------------------------------------- -----------------------------------------
Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30,
1996 1995 1995 1995 1995 1994 1994 1994
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High $22.63 $29.38 $33.00 $29.50 $23.75 $19.00 $16.13 $16.88
Low 10.31 21.50 23.75 20.63 16.13 14.88 10.75 10.06
</TABLE>
Delrina exchangeable stock has been traded on the Toronto Stock Exchange
under the symbol "DE" since the acquisition of Delrina by Symantec on
November 22, 1995. The high and low closing sales prices set forth below are
in Canadian dollars as reported on the Toronto Stock Exchange. Delrina
exchangeable stock is exchangeable at the option of the stockholders on a
one-for-one basis into Symantec common stock.
Fiscal 1996
-------------------
Mar. 31, Dec. 31,
1996 1995
-------- --------
(In Canadian dollars)
High $31.00 $37.25
Low 16.50 29.38
As of March 31, 1996, there were approximately 950 stockholders of record,
including approximately 50 holders of record of Delrina exchangeable shares.
The Company has never paid cash dividends on its stock with the exception of
cash distributions to stockholders of acquired companies. Symantec
anticipates that it will continue to retain its earnings to finance the
growth of its business. In addition, the Company's bank line of credit and
outstanding convertible subordinated debentures limit the payment of cash
dividends on common stock (See Notes 4 and 5 of Notes to Consolidated
Financial Statements in Part IV, Item 14 of this Form 10-K).
17
<PAGE>
ITEM 6:SELECTED FINANCIAL DATA.
The following selected financial data is qualified in its entirety by and
should be read in conjunction with the more detailed consolidated financial
statements and related notes included elsewhere herein. During fiscal 1996,
Symantec acquired Delrina Corporation ("Delrina") in a transaction accounted
for as a pooling of interests. All financial information has been restated
to reflect the combined operations of Symantec and Delrina. Additional
acquisitions accounted for as poolings of interest include Intec Systems
Corporation, Central Point Software, Inc. and SLR Systems, Inc. in fiscal
1995, Fifth Generation Systems, Inc. and Contact Software International, Inc.
during fiscal 1994, Certus International Corporation, MultiScope, Inc., The
Whitewater Group, Inc. and Symantec (UK) Ltd. during fiscal 1993, and Zortech
Ltd., Dynamic Microprocessor Associates, Inc. and Leonard Development Group
in fiscal 1992. The Company has never paid cash dividends on its stock with
the exception of distributions to stockholders of acquired companies.
FIVE YEAR SUMMARY
<TABLE>
<CAPTION>
Year Ended March 31,
(In thousands, except ----------------------------------------------------
net income (loss) per share) 1996 1995 1994 1993 1992
- ------------------------------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues $445,432 $431,268 $403,206 $382,911 $381,573
Acquisition, restructuring and
other expenses 27,617 9,545 56,094 23,836 9,994
Operating income (loss) (48,279) 40,286 (47,290) (59,792) 37,695
Net income (loss) (39,783) 33,409 (44,421) (46,304) 24,543
Distributions to stockholders
of acquired companies -- -- -- 162 1,986
Net income (loss) per share - primary $ (0.76) $ 0.65 $ (0.96) $ (1.09) $ 0.58
Net income (loss) per share - fully diluted $ (0.76) $ 0.61 $ (0.96) $ (1.09) $ 0.58
Shares used to compute net
income (loss) per share - primary 52,664 52,181 46,270 42,624 42,242
Shares used to compute net
come (loss) per share - fully diluted 52,664 56,491 46,270 42,624 42,432
March 31,
----------------------------------------------------
(In thousands) 1996 1995 1994 1993 1992
- ----------------------------------------- --------- ------- -------- -------- --------
Balance Sheet Data:
Working capital $134,643 $143,405 $101,644 $100,075 $ 84,016
Total assets 297,929 309,632 266,368 261,360 229,987
Long-term obligations, less
current portion 15,393 25,413 25,967 28,152 4,866
Stockholders' equity 180,317 184,874 129,193 139,056 144,238
</TABLE>
18
<PAGE>
ITEM 7:MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY EFFECT FUTURE RESULTS
The following discussion contains forward-looking statements that are subject
to significant risks and uncertainties. There are several important factors
that could cause actual results to differ materially from historical results
and percentages and results anticipated by the forward-looking statements
contained in the following discussion. Such factors and risks include, but
are not limited to, competition in the application and enterprise software
industry, including price and product feature competition, the introduction
of new products by existing or new competitors, the economic environment,
including government and corporate spending patterns, dependence on
distributors and the emergence of new distribution channels, including the
Internet, consumer acceptance of operating systems and the positioning of the
Company's products in these markets, the timing and consumer acceptance of
new or upgraded products, the ability to develop, market, support and acquire
new products in an environment of rapidly changing technology and operating
systems and the cost of such activities, acquisition risks, including
increased costs and uncertain benefits and the ability to effectively
integrate operations of acquired companies and manage growth, seasonality in
the retail software market in Europe and risks associated with international
operations, including currency conversion, taxes and other legal
restrictions. The release and subsequent customer acceptance of current or
upgraded versions of Windows 95 and Windows NT are particularly important
events that increase the uncertainty and will likely increase the volatility
of Symantec's results over the next twelve months. In addition, the Company
operates in a complex legal environment where, for example, an increasing
number of patents are being issued that are potentially applicable to
software, and allegations of patent infringement are becoming increasingly
common in the software industry.
OVERVIEW
Symantec develops, markets and supports a diversified line of application and
system software products designed to enhance individual and workgroup
productivity as well as manage networked computing environments. Founded in
1982, the Company has offices in the United States, Canada, Asia, Australia,
Europe and Latin America.
The Company's earnings and stock price have been and may continue to be
subject to significant volatility, particularly on a quarterly basis.
Symantec has previously experienced shortfalls in revenue and earnings from
levels expected by securities analysts, which has had an immediate and
significant adverse effect on the trading price of the Company's common
stock. This may occur again in the future. Additionally, as a growing
percentage of the Company's revenues are generated from network software
products, which are frequently sold through site licenses that often occur
late in the quarter, the Company may not learn of revenue shortfalls until
late in the fiscal quarter, which could result in an even more immediate and
adverse effect on the trading price of the Company's common stock.
Furthermore, the Company participates in a highly dynamic industry, which
often results in significant volatility of the Company's common stock price.
In particular, the impact of, and investors' assessment of the impact of, the
market's acceptance and adoption rate of Microsoft's operating systems,
Windows 95 and Windows NT, on Symantec's business may result in significant
increases in the volatility of Symantec's stock price. In addition, the
trend towards server-based applications in networks and over the Internet
could have a material adverse effect on sales of the Company's desktop-based
products which may not be offset by sales of the Company's network-based
products.
19
<PAGE>
During the last three fiscal years, Symantec has acquired the following
companies:
<TABLE>
<CAPTION>
Shares of Acquired
Symantec Company
Common Stock
Stock Options
Companies Acquired Date Acquired Issued Assumed
- -------------------------------------------------- ----------------- ---------- ---------
<S> <C> <C> <C>
Delrina Corporation ("Delrina") November 22, 1995 13,684,174* 1,271,677
Intec Systems Corporation ("Intec") August 31, 1994 133,332 --
Central Point Software, Inc. ("Central Point") June 1, 1994 4,029,429 707,452
SLR Systems, Inc. ("SLR") May 31, 1994 170,093 --
Fifth Generation Systems, Inc. ("Fifth Generation") October 4, 1993 2,769,010 --
Contact Software International, Inc. ("Contact") June 2, 1993 2,404,019 232,589
</TABLE>
* Includes Delrina exchangeable stock that is traded on the Toronto Stock
Exchange. Delrina stockholders received Delrina exchangeable stock in
exchange for Delrina common stock at a rate of 0.61 per share. Delrina
exchangeable stock may be converted into Symantec common stock on a
one-for-one basis at each stockholder's option.
All of these acquisitions were accounted for as poolings of interest.
Accordingly, all financial information has been restated to reflect the
combined operations of these companies and Symantec with the exception of
Intec and SLR, which had results of operations that were not material to
Symantec's consolidated financial statements.
Symantec has completed a number of acquisitions and expects to acquire other
companies in the future. While the Company believes that previous
acquisitions were in the best interest of the Company and its stockholders,
acquisitions involve a number of special risks, including the diversion of
management's attention to assimilation of the operations and personnel of the
acquired companies in an efficient and timely manner, the retention of key
employees, the difficulty of presenting a unified corporate image, the
coordination of research and development and sales efforts and the
integration of the acquired products.
The Company has lost certain employees of acquired companies whom it desired
to retain, and, in some cases, the assimilation of the operations of acquired
companies took longer than initially had been anticipated by the Company. In
addition, because the employees of acquired companies have frequently
remained in their existing, geographically diverse facilities, the Company
has not realized certain economies of scale that might otherwise have been
achieved.
Symantec typically incurs significant acquisition expenses for legal,
accounting and financial advisory services, the write-off of duplicative
technology and other expenses related to the combination of the companies.
These expenses may have a significant adverse impact on the Company's future
profitability and financial resources.
20
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth each item from the consolidated statements of
operations as a percentage of net revenues and the percentage change in the
total amount of each item for the periods indicated.
Period-to-Period
Percentage
Increase (Decrease)
-------------------
1996 1995
Year Ended March 31, Compared Compared
1996 1995 1994 to 1995 to 1994
------ ------ ------ --------- --------
Net revenues . . . . . . . . . . . . 100% 100% 100% 3% 7%
Cost of revenues . . . . . . . . . . 25 21 25 20 (11)
------ ------ ------
Gross margin. . . . . . . . . . . 75 79 75 (1) 13
Operating expenses:
Research and development. . . . . . 21 17 17 34 4
Sales and marketing . . . . . . . . 52 44 47 21 0
General and administrative. . . . . 7 7 9 12 (14)
Acquisition, restructuring and
other non-recurring expenses . . . 6 2 14 189 (83)
------ ------ ------
Total operating expenses. . . . . 86 70 87 28 (14)
------ ------ ------
Operating income (loss). . . . . . . (11) 9 (12) * *
Interest income. . . . . . . . . . . 2 1 1 33 132
Interest expense . . . . . . . . . . -- -- -- (38) (4)
Other income (expense), net. . . . . (1) -- -- * (39)
------ ------ ------
Income (loss) before income taxes. . (10) 10 (11) * *
Provision (benefit) for income taxes (1) 2 -- * *
------ ------ ------
Net income (loss). . . . . . . . . . (9)% 8% (11)% * *
------ ------ ------
------ ------ ------
- --------------------------------------
* percentage change is not meaningful.
NET REVENUES.
Net revenues increased 3% from $431.3 million in fiscal 1995 to $445.4
million in fiscal 1996. During fiscal 1996, the Company experienced
increased net revenues from its Network/Communications Utilities and Security
Utilities products, offset in part by decreased revenues from its Fax and
Consumer/Productivity Application products. In addition, Symantec
experienced an increase in net revenue from the introduction of several
Windows 95 products; however, this increase was substantially offset by a
decrease in net revenues related to Windows 3.1 and DOS products.
Net revenues for fiscal 1996 also include $7.2 million of international net
revenue previously deferred by Central Point. In March 1994, due to concerns
regarding Central Point's long-term viability and the announced acquisition
of Central Point by Symantec, Central Point was unable to reasonably estimate
future product returns from its distributors and resellers. In addition,
there were high levels of inventory in the distribution channel that had been
shipped into the channel prior to the acquisition. Central Point believed
that there was a high risk of this inventory being returned. In accordance
with Statement of Financial Accounting Standards No. 48, Central Point
revenue and the related cost of revenue for fiscal 1994 for software
shipments to Central Point's distributors and resellers was deferred until
sold by the distributors or resellers to end users. Since the acquisition,
Symantec analyzed sell-through and product return information related to the
Central Point products to determine when such products were sold-through.
Symantec believes its sales and marketing programs were successful in selling
the remaining deferred inventory to end users. Accordingly, in the quarter
ended June 30, 1995, Symantec was able to estimate the remaining Central
Point product returns in the international distribution channel and, as a
result, recognized
21
<PAGE>
approximately $7.2 million of international net revenues and $1.7 million of
international cost of revenues previously deferred by Central Point.
Net revenues increased 7% from $403.2 million in fiscal 1994 to $431.3
million in fiscal 1995. The increase in fiscal 1995 net revenues from the
prior year was principally due to an increase in unit sales of Fax and
Communications software products resulting from the release of new and
upgraded products in these categories, as well as an increase in site license
and distribution revenues, which was partially offset by a decrease in
upgrade and OEM revenues. The increase in site license revenues during
fiscal 1995 was primarily due to the release of several new network products
which were generally sold through site licenses. The decrease in upgrade
revenues was primarily due to several products which were intentionally not
upgraded in anticipation of the release of products designed for the Windows
95 operating systems.
In fiscal 1994, the deferral of Central Point revenue discussed above
resulted in a decrease in North American net revenues of approximately $5.0
million and international net revenues of approximately $10.0 million and an
increase in the fiscal 1994 loss before provision for income taxes of
approximately $12.3 million. As a result of Symantec's further analysis of
returns related to the Central Point products during fiscal 1995, in the
March 1995 quarter Symantec was able to assess the remaining Central Point
product returns in the North American distribution channel and, as a result,
recognized approximately $3.0 million of North American net revenues
previously deferred by Central Point.
Net revenues from international sales grew from approximately $116.4 million
in fiscal 1994 to $134.6 million in fiscal 1995 and to $142.2 million in
fiscal 1996 and represented 29%, 31% and 32% of net revenues, respectively.
The increase in international net revenues from fiscal 1995 to fiscal 1996
resulted primarily from increased Delrina international net revenues and
growth in Symantec's Asia/Pacific region, product upgrade sales of
international versions of Symantec's Windows 95 products and recognition of
the Central Point deferred revenue discussed above. The increase in
international net revenues from fiscal 1994 to fiscal 1995 was largely due to
the favorable impact of the change in foreign currency exchange rates during
fiscal 1995.
Enhanced product releases typically result in an increase in net revenues
during the first three to six months following their introduction due to
purchases by existing users, usually at discounted prices, and initial
inventory purchases by Symantec's distributors. In addition, between the
date Symantec announces a new version or new product and the date of release,
distributors, dealers and end users often delay purchases, cancel orders or
return products in anticipation of the availability of the new version or new
product.
The Company's pattern of revenues and earnings may also be affected by a
phenomenon known as "channel fill." Channel fill occurs following the
introduction of a new product or a new version of a product as distributors
buy significant quantities of the new product or version in anticipation of
sales of such product or version. Following such purchases, the rate of
distributors' purchases often declines in a material amount, depending on the
rates of purchases by end users or "sell-through." The phenomenon of channel
fill may also occur in anticipation of price increases or in response to
sales promotions or incentives, some of which may be designed to encourage
customers to accelerate purchases that might otherwise occur in later
periods. Channels may also become filled simply because the distributors are
unable to, or do not, sell their inventories to retail distribution or end
users as anticipated. If sell-through does not occur at a sufficient rate,
distributors will delay purchases or cancel orders in later periods or return
prior purchases in order to reduce their inventories. Such order delays or
cancellations can cause material fluctuations in revenues from one quarter to
the next. The impact is somewhat mitigated by the Company's deferral of
revenue associated with inventories estimated to be in excess of levels
deemed appropriate in the distribution channel; however, net revenues may
still be materially affected favorably or adversely by the effects of channel
fill. Channel fill did not have a material impact on the Company's revenues
in fiscal 1996, 1995 or 1994 but may have a material impact in future
periods, especially in periods where a large number of new products are
introduced.
Symantec believes that many of its customers are moving toward an
enterprise-wide computing environment where more desktop personal computers
will be interconnected into large local-area and wide-area networks
administered by corporate MIS departments as well as the Internet.
Symantec's entry into the enterprise software market is relatively new and,
as a result, Symantec is beginning to compete with companies with which it
has not previously competed. As a result, there is uncertainty regarding
customer acceptance of the Company's products as Symantec has not been a
major supplier in the enterprise market. These factors increase the
uncertainty of forecasting
22
<PAGE>
financial results. While the Company expects the market's shift toward
enterprise and Internet products to continue, there can be no assurance that
the Company's enterprise products will be successful or will gain customer
acceptance.
With the expansion to enterprise-wide computing systems markets, Symantec
believes that it must continue to develop relationships with systems
integrators and other third-party vendors that provide consulting and
integration services to customers and deliver products developed for this
market segment. Furthermore, the sales cycle with respect to enterprise
products is lengthy and may be subject to integration and acceptance by the
customer. In addition, a very high proportion of enterprise product sales
are completed in the last few days of each quarter, in part because customers
are able, or believe that they are able, to negotiate lower prices and more
favorable terms. Each of these factors increases the risk that forecasts of
quarterly financial results will not be achieved.
Enterprise products are frequently sold through site licenses where a license
for multiple workstations is sold to a customer at a negotiated price.
Desktop software products are generally sold through the distribution channel
or directly to end-users. Enterprise product revenues are typically
comprised of lower volume, high dollar site license transactions compared to
desktop product revenues which are typically comprised of higher volume, low
dollar pre-packaged product transactions. The prices of site licenses tend
to vary based upon the individual products purchased, the number of units
licensed and the number of workstations at the customer's site.
Price competition is significant in the microcomputer business software
market and may continue to increase and become even more significant in the
future, resulting in reduced profit margins. Should competitive pressures in
the industry continue to increase, Symantec may be required to reduce
software prices and/or increase its spending on sales, marketing and research
and development as a percentage of net revenues, resulting in lower profit
margins. In addition, aggressive pricing strategies of competitors in other
software markets, some of whom have significantly more financial resources
than Symantec, may cause the Company to further reduce software prices and/or
increase sales and marketing expenses on a number of the Company's products.
There was no material impact to net revenues resulting from changes in
product pricing in fiscal 1996, 1995 or 1994.
Approximately 37% of the Company's net revenues in fiscal 1996 were from
sales to two large distributors. These customers tend to make the majority
of their purchases at the end of the fiscal quarter, in part because they are
able, or believe that they are able, to negotiate lower prices and more
favorable terms. This end-of-period buying pattern means that forecasts of
quarterly and annual financial results are particularly vulnerable to the
risk that they will not be achieved, either because expected sales do not
occur or because they occur at lower prices or on less favorable terms to the
Company. The Company's distribution customers also carry the products of
Symantec's competitors, some of which have greater financial resources than
the Company. The distributors have limited capital to invest in inventory,
and their decisions to purchase the Company's products is partly a function
of pricing, terms and special promotions offered by Symantec as well as by
its competitors over which the Company has no control and which it cannot
predict.
While Symantec's diverse product line has tended to lessen fluctuations in
quarterly net revenues, these fluctuations have occurred recently and are
likely to occur in the future. These fluctuations may be caused by a number
of factors, including the timing of announcements and releases of new or
enhanced versions of its products and product upgrades, the introduction of
competitive products by existing or new competitors, reduced demand for any
given product, seasonality in the retail software market in Europe, the
market's transition between operating systems and the transition from a
desktop PC environment to an enterprise-wide environment. These factors may
cause significant fluctuations in net revenues and, accordingly, operating
results.
The Company is devoting substantial efforts to the development of software
products that are designed to operate on Microsoft's Windows 95 and/or
Windows NT operating systems. Microsoft has incorporated advanced utilities
including telecommunications, facsimile and data recovery utilities in
Windows 95 and may include additional product features in future releases of
Windows 95 or Windows NT that may decrease the demand for certain of the
Company's products, including those currently under development. Should
Windows 95 or Windows NT not achieve timely market acceptance, or should the
Company be unable to successfully or timely develop products that operate
under these operating systems, the Company's future net revenues and
operating results would be immediately and significantly adversely affected.
In addition, as the timing of delivery and adoption of many of Symantec's
products is dependent on the adoption rate of these operating systems, which
the Company and securities analysts are unable to predict, the ability of
Symantec and securities analysts to forecast the Company's
23
<PAGE>
net revenues has been and will continue to be adversely impacted. As a
result, there is a heightened risk that net revenues and profits will not be
in line with analysts' expectations in the periods following the introduction
of or upgrades to Windows 95 and Windows NT.
The length of Symantec's product development cycle has generally been greater
than Symantec originally expected. Although such delays have undoubtedly had
a material adverse effect on Symantec's business, Symantec is not able to
quantify the magnitude of net revenues that were deferred or lost as a result
of any particular delay because Symantec is not able to predict the amount of
net revenues that would have been obtained had the original development
expectations been met. Delays in product development, including products
being developed for Windows 95 or Windows NT, are likely to occur in the
future and could have a material adverse effect on the amount and timing of
future revenues. Due to the inherent uncertainties of software development
projects, Symantec does not generally disclose or announce the specific
expected shipment date of the Company's product introductions. In addition,
there can be no assurance that any products currently being developed by
Symantec, including products being developed for Windows 95 or Windows NT,
will be technologically successful, that any resulting products will achieve
market acceptance or that the Company's products will be effective in
competing with products either currently in the market or introduced in the
future.
During fiscal 1993, Symantec believes net revenues were adversely affected by
an unexpected substantial price reduction in 486-based personal computers
that caused a shift in customer spending from software to personal computer
hardware. Symantec also believes that the shift was caused by the
introduction of Windows 3.1, which required more computing capability. If
the next class of personal computers, including those based on Intel's
P6/Pentium Pro microprocessor or Motorola, Inc.'s Power PC, are also rapidly
reduced in price, there may be another unexpected shift in customer buying
away from software and Symantec's products, which could result in
significantly reduced revenues and a material adverse effect on operating
results. In addition, Windows 95 and Windows NT requires significantly more
computer memory and hard disk space than Windows 3.1, and if there is a shift
from software to hardware spending, there could be an adverse effect on the
sales of computer hardware and software. Either of these events could result
in significantly reduced net revenues and have a material adverse effect on
Symantec's operating results. Symantec has noted that P6/Pentium Pro
microprocessors have been reduced in price and are being marketed
aggressively by Intel.
The Company estimates and maintains reserves for product returns. Symantec's
return policy allows its distributors, subject to certain limitations, to
return purchased products in exchange for new products or for credit towards
future purchases. End users may return products through dealers and
distributors within a reasonable period from the date of purchase for a full
refund, and retailers may return older versions of products. Various
distributors and resellers may have different return policies that may
negatively impact the level of products which are returned to Symantec.
Product returns occur when the Company introduces upgrades and new versions
of products or when distributors order too much product. In addition,
competitive factors often require the Company to offer rights of return for
products that distributors or retail stores are unable to sell. Symantec has
experienced, and may experience in the future, significant increases in
product returns above historical levels from customers of acquired companies
after an acquisition is completed. Symantec prepares detailed analyses of
historical return rates when estimating anticipated returns and maintains
reserves for product returns. In addition to detailed historical return
rates, the Company's estimation of return reserves takes into consideration
upcoming product upgrades, current market conditions, customer inventory
balances and any other known factors that could impact anticipated returns.
Based upon returns experienced, the Company's estimates have been materially
accurate. The impact of actual returns on net revenues, net of such
provisions, has not had a material effect on the Company's liquidity as the
returns typically result in the issuance of credit towards future purchases
as opposed to cash payments to the distributors. However, there can be no
assurance that future returns will not exceed the reserves established by the
Company or that future returns will not have a material adverse effect on the
operating results of the Company.
The Company's product return reserve balances typically fluctuate from period
to period based upon the level and timing of product upgrade releases.
Product return reserve balances at March 31, 1996 were higher than reserve
balances at March 31, 1995. The increase was primarily related to the
introduction of Symantec's Windows 95 products during the last three quarters
of fiscal 1996, which had high sell-in volumes. The level of actual product
returns and related product return reserves is largely a factor of the level
of product sell-in (gross revenue) from normal sales activity and the
replacement of obsolete quantities with the current version of the Company's
product. As a result, gross revenues generally move in the same direction as
product returns. Changes in the levels of
24
<PAGE>
product returns and related product return reserves are generally offset by
changing levels of gross revenue and, therefore, do not typically have a
material impact on reported net revenues.
The Company operates with relatively little backlog; therefore, if near-term
demand for the Company's products weakens in a given quarter, there could be
an immediate, material adverse effect on net revenues and on the Company's
operating results.
Symantec maintains a research and development facility in Santa Monica,
California that was damaged during the January 1994 earthquake in Southern
California. Much of the Company's administration, sales and marketing,
manufacturing and research and development facilities are located on the west
coast of the United States. Future earthquakes or other natural disasters
could cause a significant disruption to the Company's operations and may
cause delays in product development that could adversely impact future
revenues of the Company.
Also, Symantec's order entry department is located in Oregon, with shipments
being made from a warehouse in California. Order entry and shipping is
similarly separated in Europe. A disruption in communications between these
facilities, particularly at the end of a fiscal quarter, would likely result
in an unexpected shortfall in net revenues and could result in an adverse
impact on operating results.
During the March 1994 quarter, Symantec introduced a new product support
program that provides a wide variety of free and fee-based technical support
services to its customers. Symantec provides its customers with free support
via electronic and automated services as well as 90 days complimentary free
telephone support for certain of the Company's products. In addition,
Symantec offers both individual users and corporate customers a variety of
fee-based support options for certain of the Company's products, designed to
meet their individual technical support requirements. Fee-based technical
support services did not generate significant revenues in fiscal 1996, 1995
and 1994, and are not expected to generate material revenues in the near
future.
GROSS MARGIN.
Gross margin represents net revenues less cost of revenues. Cost of revenues
consists primarily of manufacturing expenses, costs for producing manuals,
packaging costs, royalties paid to third parties under publishing contracts
and amortization and write-off of capitalized software. Amortization of
capitalized software, including amortization and the write-off of both
purchased product rights and capitalized software development expenses,
totaled $19.1 million, $13.4 million and $20.5 million for fiscal 1996, 1995
and 1994, respectively. The significant increase in amortization and
write-off of purchased product rights and capitalized software development
expenses in fiscal 1996 over fiscal 1995 was the result of Symantec's
decision to de-emphasize its continued development and marketing efforts
related to certain products as well as Delrina's write-off of previously
capitalized software development costs of software designed to operate on
Windows 3.1. The decrease in such costs in fiscal 1995 from fiscal 1994 was
due to the write-off of certain previously capitalized software costs by
Central Point during fiscal 1994.
Gross margins decreased to 75% of net revenues in fiscal 1996 from 79% in
fiscal 1995 and remained level with 75% in fiscal 1994. The decline in the
gross margin percentage in fiscal 1996 compared to fiscal 1995 was due to an
increase in the amortization and write-off of purchased product rights and
capitalized software development expenses noted above and increased reserves
related to Delrina products designed to operate on Windows 3.1, as well as
other products de-emphasized by Symantec during fiscal 1996. The increase in
the gross margin percentage in fiscal 1995 compared to fiscal 1994 was
largely due to the growth in higher margin enterprise products, which are
typically sold through site licenses, as well as Symantec's ability to
manufacture Central Point products with a lower cost structure than Central
Point. Due to reduced amortization and write-off of purchased product
rights, Symantec believes that the gross margin percentage will increase to
approximately 80% to 83% in Fiscal 1997 unless there is a significant change
in Symantec's net revenues.
The microcomputer business software market has been subject to rapid changes
that can be expected to continue. Future technology or market changes may
cause certain products to become obsolete more quickly than expected and thus
may result in capitalized software write-offs and an increase in required
inventory reserves and, therefore, reduced gross margins and net income. In
addition, the modifications to computer software, including the correction of
software bugs, may result in significant inventory rework costs, including
the cost of replacing inventory in the distribution channel.
25
<PAGE>
RESEARCH AND DEVELOPMENT EXPENSES.
Research and development expenses increased 34% to $94.7 million or 21% of
net revenues in fiscal 1996 from $70.7 million or 16% of net revenues in
fiscal 1995 and was $68.1 million or 17% of net revenues in fiscal 1994. The
increase in research and development expenses in fiscal 1996 as compared to
fiscal 1995 was primarily the result of increased product development efforts
associated with Symantec's and Delrina's development of new Windows 95
products. The increase in research and development expenses in fiscal 1995
in absolute dollars as compared to fiscal 1994 was principally due to an
increase in the number and scope of development projects undertaken by
Delrina, including localization of products for international markets and new
product development in anticipation of the launch of Windows 95, offset in
part by savings from the consolidation of product development efforts
resulting from the acquisition of Central Point.
Symantec believes increased research and development expenditures will be
necessary in order to remain competitive. The Company expects research and
development expenses to increase in dollar amount but may decline as a
percentage of net revenues should net revenues increase more quickly than
research and development expenses. While the Company believes its research
and development expenditures will result in successful product introductions,
including products being developed for Windows 95 and Windows NT, the
uncertain outcome of software development projects means that increased
research and development efforts will not necessarily result in successful
product introductions due to technical difficulties, market conditions,
competitive products and other factors, such as customer acceptance of new
operating systems.
Research and development expenditures are charged to operations as incurred.
Financial accounting rules requiring capitalization of certain software
development costs have not materially affected the Company, except for
amounts capitalized by Delrina prior to its acquisition by Symantec. Delrina
did not capitalize any software development costs in fiscal 1996 and
capitalized $6.3 million and $2.6 million in software development costs in
fiscal years 1995 and 1994, respectively. The related amortization expense
was $5.6 million, $4.0 million and $1.9 million in fiscal 1996, 1995 and
1994, respectively.
SALES AND MARKETING EXPENSES.
Sales and marketing expenses increased 21% to $229.7 million or 52% of net
revenues in fiscal 1996 from $190.4 million or 44% of net revenues in fiscal
1995 and from $190.0 million or 47% of net revenues in fiscal 1994. The
increase in sales and marketing expenses in fiscal 1996 as compared to fiscal
1995 was principally due to an increase in marketing development expenses and
an increase in sales and marketing expenses primarily associated with the
release of Symantec's Windows 95 products. The decrease in fiscal 1995 as a
percent of net revenues as compared to fiscal 1994 was principally due to the
elimination of duplicative sales organizations subsequent to the acquisition
of Central Point, offset in part by increased sales and marketing expenses
associated with Delrina's expansion in Europe.
Symantec believes substantial sales and marketing efforts are essential to
achieve revenue growth and to maintain and enhance Symantec's competitive
position. Accordingly, with the introduction of new and upgraded products,
including products currently being developed for Windows 95 and Windows NT,
Symantec expects the expenses associated with these efforts to increase in
dollar amount and to continue to constitute its most significant operating
expense. There can be no assurance that these increased sales and marketing
efforts will be successful. Symantec believes that the Company's sales and
marketing expenses may decrease as a percentage of net revenues in the near
term following the high expenses associated with the launch of Windows 95
products but may increase as a percentage of net revenues should net revenues
not increase.
GENERAL AND ADMINISTRATIVE EXPENSES.
In fiscal 1996, general and administrative expenses increased in absolute
dollars by 12% to $32.7 million or 7% of net revenues from $29.4 million or
7% of net revenues in fiscal 1995, and decreased from $34.3 million or 9% of
net revenues in fiscal 1994. The increase in general and administrative
expenses in absolute dollars in fiscal 1996 as compared to fiscal 1995 was
principally due to significant general and administrative expenses incurred
by Delrina in the three month period ended September 30, 1995, as well as
certain legal fees incurred by Delrina. In the fourth quarter of fiscal
1996, general and administrative expenses decreased to 5% of net revenues
from 8% in the fourth quarter of fiscal 1995. This decrease resulted
primarily from the elimination of duplicative general and administrative
functions subsequent to the acquisition of Delrina. The decrease in fiscal
1995 as compared to fiscal 1994 was principally due to benefits resulting
from the consolidation of the general and administrative functions of
26
<PAGE>
Symantec and Central Point. Subsequent to the acquisition of Central Point
by Symantec in fiscal 1995, various duplicative general and administrative
functions were eliminated as a result of the combination of the companies.
In addition, general and administrative expenses decreased due to the
settlement of two class action lawsuits in fiscal 1994 resulting in a
decrease in legal expenses during fiscal 1995.
While future growth of the Company is expected to result in an increase in
the dollar amount of general and administrative spending from current levels,
the Company expects general and administrative expenses to decrease as a
percent of net revenues in fiscal 1997 as compared to fiscal 1996 as benefits
are achieved from the elimination of duplicative functions subsequent to the
acquisition of Delrina.
ACQUISITION, RESTRUCTURING AND OTHER EXPENSES.
ACQUISITION EXPENSES. In connection with the various acquisitions completed
in fiscal 1996, 1995 and 1994 (see Summary of Significant Accounting Policies
and Note 10 of Notes to Consolidated Financial Statements), significant
acquisition expenses were incurred. These acquisition expenses principally
included fees for legal, accounting and financial advisory services, the
write-off of duplicative capitalized technology, the modification of certain
development contracts and expenses related to the combination of the
companies, including the elimination of duplicative and excess facilities and
personnel. These charges approximated $19.7 million, $9.5 million and $25.9
million in fiscal 1996, 1995 and 1994, respectively.
In connection with the acquisition of Delrina in fiscal 1996, Symantec
recorded total acquisition charges of $22.0 million, which included $8.8
million for legal, accounting and financial advisory services, $6.4 million
for the elimination of duplicative and excess facilities and equipment, $3.7
million for personnel severance and outplacement expenses and $3.1 million
for the consolidation and discontinuance of certain operational activities
and other acquisition-related expenses.
In connection with the acquisitions of Central Point and SLR, Symantec
recorded total acquisition charges of $9.5 million in fiscal 1995. The
charges included $3.2 million for legal, accounting and financial advisory
services, $1.0 million for the write-off of duplicative product-related
expenses and modification of certain development contracts, $0.9 million for
the elimination of duplicative and excess facilities, $3.1 million for
personnel severance and outplacement expenses and $1.3 million for the
consolidation and discontinuance of certain operational activities and other
acquisition-related expenses. During fiscal 1996, the Company recognized a
reduction in accrued acquisition, restructuring and other expenses of $2.3
million as actual costs incurred were less than costs previously accrued by
the Company.
Symantec has completed a number of acquisitions and expects to acquire other
companies in the future. While the Company believes that previous
acquisitions were in the best interest of the Company and its stockholders,
acquisitions involve a number of special risks, including the diversion of
management's attention to assimilation of the operations and personnel of the
acquired companies in an efficient and timely manner, the retention of key
employees, the difficulty of presenting a unified corporate image, the
coordination of research and development and sales efforts and the
integration of the acquired products.
The Company has lost certain employees of acquired companies whom it desired
to retain, and, in some cases, the assimilation of the operations of acquired
companies took longer than initially had been anticipated by the Company. In
addition, because the employees of acquired companies have frequently
remained in their existing, geographically diverse facilities, the Company
has not realized certain economies of scale that might otherwise have been
achieved.
Symantec typically incurs significant acquisition expenses for legal,
accounting and financial advisory services, the write-off of duplicative
technology and other expenses related to the combination of the companies.
These expenses may have a significant adverse impact on the Company's future
profitability and financial resources.
RESTRUCTURING EXPENSES. In February 1995, Symantec announced a plan to
consolidate certain research and development activities. This plan was
designed to gain greater synergy between the Company's Third Generation
Language and Fourth Generation Language development groups. During fiscal
1996, the Company completed the combination and incurred $2.2 million for the
relocation costs of moving equipment and personnel.
During fiscal 1994, Symantec implemented a plan to consolidate and centralize
certain operational activities (See Note 10 of Notes to Consolidated
Financial Statements). This plan was designed to reduce operating expenses
and enhance operational efficiencies by centralizing certain order
administration, technical support and customer service
27
<PAGE>
activities in Eugene, Oregon. In fiscal 1994, the Company recorded a charge
of $4.7 million, which included $1.1 million for the elimination of
duplicative and excess facilities, $1.5 million for the relocation of the
Company's existing operations and equipment, $1.1 million for employee
relocation expenses and $1.0 million for employee severance payments. This
centralization has been completed.
During fiscal 1994, Central Point incurred $16.0 million of expenses related
to the restructuring of its operations in order to reduce its overall cost
structure and to redirect its software development and marketing efforts away
from the personal desktop computer market toward personal computer network
markets. The charge included $6.2 million for employee severance,
outplacement and relocation expenses, $5.6 million for the write-off of
certain excess fixed and intangible assets, $1.8 million for lease
abandonments and facility relocation and $2.4 million for the consolidation
and discontinuance of certain operational activities and other related
expenses. This restructuring has been completed.
OTHER EXPENSES. In fiscal 1996, Symantec sold the assets of Time Line
Solutions Corporation, a wholly-owned subsidiary, to a group comprised of
Time Line Solutions Corporation's management and incurred a $2.7 million loss
on the sale. In the fourth quarter of fiscal 1996, the Company recorded $2.0
million in estimated legal fees expected to be incurred in connection with a
securities class action complaint filed in March 1996 and other legal
expenses (See Note 11 of Notes to Consolidated Financial Statements).
During fiscal 1994, Symantec reached an agreement with the plaintiffs and
Symantec's insurance carriers to settle two securities class actions and a
related derivative lawsuit brought by stockholders of Symantec (See Note 10
of Notes to Consolidated Financial Statements). The combined settlement
amount of the cases was $19.0 million, approximately $12.5 million of which
was paid by Symantec's insurance carriers. Symantec recorded a charge in
fiscal 1994 of $6.5 million, representing Symantec's portion of the
settlement.
In fiscal 1994, Central Point purchased from unrelated parties certain
in-process software technologies for $3.0 million which was immediately
expensed. (See Note 10 of Notes to Consolidated Financial Statements).
Symantec is involved in a number of other judicial and administrative
proceedings incidental to its business (See Note 11 of Notes to Consolidated
Financial Statements). The Company intends to defend all of these lawsuits
vigorously and, although an unfavorable outcome could occur in one or more of
the cases, the final resolution of these lawsuits, individually or in the
aggregate, is not expected to have a material adverse effect on the financial
position of the Company. However, depending on the amount and timing of an
unfavorable resolution of these lawsuits, it is possible that the Company's
future results of operations or cash flows could be materially adversely
effected in a particular period.
As of March 31, 1996, total accrued cash related acquisition and
restructuring expenses were $7.8 million and included $2.0 million for legal
fees, $3.5 million for the elimination of duplicative and excess facilities
and $2.3 million for the consolidation and discontinuance of certain
operational activities and other acquisition-related expenses.
INTEREST INCOME, INTEREST EXPENSE AND OTHER INCOME (EXPENSE).
Interest income was $7.5 million, $5.6 million and $2.4 million in fiscal
1996, 1995 and 1994, respectively. The increase in interest income in fiscal
1996 over fiscal 1995, and in fiscal 1995 over fiscal 1994 was due to higher
average invested cash balances. Interest expense was $1.5 million, $2.4
million and $2.5 million in fiscal 1996, 1995 and 1994, respectively. The
decrease in interest expense in fiscal 1996 from fiscal 1995 and 1994 was
principally due to reduced interest expense on convertible subordinated
debentures that were issued on April 2, 1993. On April 26, 1995, convertible
subordinated debentures totaling $10.0 million were converted into 833,333
shares of Symantec common stock, resulting in the decrease in fiscal 1996
interest expense. Other income (expense) is primarily comprised of foreign
currency exchange gains and losses from fluctuations in currency exchange
rates.
The Company conducts business in various foreign currencies and is therefore
subject to the transaction exposures that arise from foreign exchange rate
movements between the dates that foreign currency transactions are recorded
and the dates that they are settled. Symantec utilizes some natural hedging
to mitigate the Company's transaction exposures and, effective December 31,
1993, the Company commenced hedging some residual transaction exposures
through the use of one-month forward contracts. At March 31, 1996, there was
a total of approximately $96.5 million of outstanding forward exchange
contracts. The net liability of forward contracts was approximately
28
<PAGE>
$85.5 million at March 31, 1996. There have been no significant gains or
losses to date with respect to these activities. Gains or losses would occur
on forward contracts held by the Company when changes in foreign currency
exchange rates occur. These gains and losses should be largely offset by the
transaction gains and losses resulting from foreign currency denominated
cash, accounts receivable, intercompany balances and trade payables. There
can be no assurance that these strategies will continue to be effective or
that transaction gains or losses can be minimized or forecasted accurately.
The Company does not hedge its translation risk.
INCOME TAXES.
The effective income tax benefit for fiscal 1996 was 10%, which compares to
an effective income tax provision of 25% in fiscal 1995 and an effective tax
benefit of 3% in fiscal 1994. The 1996 income tax benefit of 10% is lower
than the statutory rate primarily due to the unbenefitted losses related to
the Delrina acquisition.
A net deferred tax asset of approximately $12.8 million is reflected in the
financial statements. Approximately $35.0 million of future U.S. taxable
income will be necessary to realize this deferred tax asset. While there can
be no assurance that future income will be sufficient to realize this
benefit, management is of the opinion that this benefit will be realized in
the near future based on projected income from new and existing products. A
valuation allowance of $45.7 million was provided in the financial
statements. Approximately $19.7 million of the valuation allowance for
deferred tax assets is attributable to stock option deductions, the benefit
of which will be credited to equity when realized. Approximately $18.1
million of the valuation allowance relates to losses and temporary
differences associated with Delrina and the remaining $7.9 million of the
valuation allowance represents net operating loss and tax credit
carryforwards of other acquired companies that are limited by separate return
limitations and under the "change of ownership" rules of Internal Revenue
Code Section 382.
LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments decreased $2.6 million from $131.8 million at
March 31, 1995 to $129.2 million at March 31, 1996. This decrease was
largely due to cash expenditures for capital equipment, which was partially
offset by cash provided from operating activities and proceeds from the
exercise of stock options. Net cash provided by operating activities was
$11.0 million and was primarily due to the change in net assets and
liabilities and non-cash related expenses, offset in part by the Company's
net loss of $39.8 million.
Trade accounts receivable decreased $9.0 million from $81.3 million at March
31, 1995 to $72.3 million at March 31, 1996 primarily due to an increase in
reserves for product returns at March 31, 1996.
The Company has a $10.0 million line of credit that expires in March 1998.
The line of credit is available for general corporate purposes and bears
interest at the bank's reference (prime) interest rate (8.25% at March 31,
1996), the U.S. offshore rate plus 1.25%, a CD rate plus 1.25% or LIBOR plus
1.25%, at the Company's discretion. The line of credit requires bank
approval for the payment of cash dividends. Borrowings under this line are
unsecured and are subject to the Company maintaining certain financial ratios
and profits. At March 31, 1996, there was approximately $ 0.4 million of
outstanding standby letters of credit under this line of credit. There were
no borrowings outstanding under this line at March 31, 1996. The Company was
in compliance with the debt covenants at March 31, 1996. Future acquisitions
by the Company may cause the Company to be in violation of the line of credit
covenants; however, the Company believes that if the line of credit were
canceled or amounts were not available under the line, there would not be a
material adverse impact on the financial results, liquidity or capital
resources of the Company.
The Company may utilize significant amounts of cash in connection with the
potential acquisition of additional companies, capital equipment and software
product rights in the future. However, if the Company were to sustain
significant losses, there can be no assurance that the bank line of credit,
which is available through March 1998, would remain available. Additionally,
the Company could be required to reduce operating expenses, which could
result in further product delays, reassess acquisition opportunities, which
could negatively impact the Company's growth objectives, and/or pursue
further financing options. The Company believes existing cash and short-term
investments will be sufficient to fund operations for the next year.
29
<PAGE>
ITEM 8:FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
ANNUAL FINANCIAL STATEMENTS. See Part IV, Item 14 of this Form 10-K.
SELECTED QUARTERLY DATA. During fiscal 1996, Symantec acquired Delrina in a
transaction accounted for as a pooling of interest. All financial
information has been restated to reflect the combined operations of Symantec
and Delrina.
<TABLE>
<CAPTION>
(In thousands, except net income (loss) per share; unaudited)
- -------------------------------------------------------------
Fiscal 1996 Fiscal 1995
----------------------------------------- -----------------------------------------
Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30,
1996 1995 1995 1995 1995 1994 1994 1994
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues $115,960 $111,097 $108,510 $109,865 $108,304 $110,561 $106,841 $105,562
Gross margin 95,363 80,027 73,420 87,647 86,318 87,544 84,156 82,315
Acquisition,
restructuring and
other expenses * 2,000 25,688 -- (71) -- -- -- 9,545
Net income (loss) 7,943 (36,806) (17,786) 6,866 5,585 11,767 12,938 3,119
Net income (loss)
per share - $0.15 $(0.69) $(0.34) $ 0.13 $0.10 $0.23 $0.26 $0.06
primary
fully diluted $0.15 $(0.69) $(0.34) $ 0.12 $0.10 $0.21 $0.23 $0.06
</TABLE>
*See Note 10 of Notes to Consolidated Financial Statements.
ITEM 9:CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
30
<PAGE>
PART III
ITEM 10:DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by this Item with respect to Directors may be found in
the section captioned "Election of Symantec Directors" appearing in the
definitive Proxy Statement to be delivered to stockholders in connection with
the Annual Meeting of Stockholders to be held on September 25, 1996. Such
information is incorporated herein by reference.
EXECUTIVE OFFICERS OF THE REGISTRANT:
The executive officers of the Company are as follows:
NAME AGE POSITION
- ---------------------- ---- ------------------------------------------------
Gordon E. Eubanks, Jr. 49 President and Chief Executive Officer
Robert R. B. Dykes 46 Executive Vice President, Worldwide Operations
and Chief Financial Officer
John C. Laing 45 Executive Vice President, Desktop Products
Dennis Bennie 43 Executive Vice President, Communications Products
Mark Bailey 37 Senior Vice President, Business Development
Ted Schlein 32 Vice President, Networking and Client/Server
Technology Group
Dana E. Siebert 36 Vice President, Worldwide Sales
Christopher Calisi 36 Vice President, Communication Products
Derek Witte 39 Vice President, General Counsel and Secretary
Executive officers are chosen by and serve at the discretion of the Board of
Directors. There is no family relationship between any director or executive
officer of Symantec and any other director or executive officer of Symantec.
GORDON E. EUBANKS, JR. is the President and Chief Executive Officer of
Symantec. He has served as a director of Symantec since November 1983 and as
the President and Chief Executive Officer of Symantec since October 1986.
Mr. Eubanks also served as Symantec's Chairman of the Board from November
1983 to October 1986 and from November 1990 to January 1993. Previously, Mr.
Eubanks was Vice President of Digital Research, Inc.'s commercial systems
division where he was responsible for the development and marketing of all
system software products. He left Digital Research, Inc. in September 1983.
Mr. Eubanks founded Compiler Systems, Inc. and authored its products:
CBASIC, one of the first successful languages on personal computers, and
CB80, a compiled version of CBASIC. Compiler Systems, Inc. was acquired by
Digital Research, Inc. in August of 1981. Mr. Eubanks received his Bachelor
of Science degree in Electrical Engineering from Oklahoma State University.
He received his Masters degree in Computer Science from Naval Postgraduate
School in Monterey, California. Mr. Eubanks was a commissioned officer in
the United States Navy from 1970 to 1979 serving in the Nuclear Submarine
Force. Mr. Eubanks is also a director of NetFrame and RasterOps Corporation.
He is a member of the IEEE and ACM.
On February 26, 1993, criminal indictments were filed against Mr. Eubanks for
allegedly violating various California Penal Code Sections relating to the
misappropriation of trade secrets and unauthorized access to a computer
system. Symantec believes that the charges have no merit.
ROBERT R. B. DYKES is Executive Vice President, Worldwide Operations and
Chief Financial Officer of Symantec. Mr. Dykes joined Symantec in October
1988. From April 1984 to October 1988, Mr. Dykes was the Chief Financial
Officer at Adept Technology, Inc., a robotics firm where he oversaw all
financial procedures and reporting and developed venture capital and funding
strategies. From July 1983 to April 1984, Mr. Dykes was with Xebec, a
publicly held Winchester disk drive controller manufacturer, most recently as
Chief Financial Officer. Prior to Xebec, Mr. Dykes spent 12 years in various
financial positions at Ford Motor Company in New Zealand and Australia and
with its Finance Staff in Dearborn, Michigan, most recently as manager of the
marketing budgets
31
<PAGE>
for the Ford and Lincoln Mercury car divisions. Mr. Dykes holds a Bachelor
of Commerce and Administration degree from Victoria University in Wellington,
New Zealand. Mr. Dykes is on the board of directors of Flextronics
International, Ltd.
JOHN C. LAING is Executive Vice President, Desktop Products of Symantec.
Prior to serving in this position, Mr. Laing served as Executive Vice
President, Worldwide Sales of Symantec. Mr. Laing joined Symantec in March
1989 as Vice President/Sales. Before joining Symantec, Mr. Laing served as
Regional Director for Apple Computer, Inc. ("Apple"), a microcomputer
manufacturer, in the Midwest. In that position his responsibilities included
managing Apple's sales, marketing and support activities within Illinois,
Wisconsin and Northern Indiana. Prior to joining Apple in July 1986, Mr.
Laing served as Vice President and General Manager at ECZEL Corporation, a
division of Crown Zellerbach Corporation. Mr. Laing spent the majority of
his earlier career at Xerox Corporation, where he served in a variety of
sales and sales management positions over a ten-year period. Mr. Laing is a
director of Macromedia, Inc., a multimedia software developer, and the
Software Publishers Association.
DENNIS BENNIE was Executive Vice President, Communications Products of
Symantec and served as a Director of Symantec from November 1995 until April
1996. Mr. Bennie co-founded Delrina and served as Chairman of the Board of
Directors and Chief Executive Officer of Delrina from June 1988 until
November 1995. He oversaw all international expansion and financial
activities. Prior to joining Delrina, Mr. Bennie co-founded and served as
President of Ingram Software Ltd., one of Canada's largest software
distributors, from 1984 to 1988.
MARK BAILEY is Senior Vice President, Business Development of Symantec. Mr.
Bailey has led Symantec's mergers and acquisitions effort since December
1989. Prior to that, Mr. Bailey was an associate partner with one of the
early investors in Symantec, Kleiner Perkins Caufield & Byers. Before
attending graduate school, Mr. Bailey worked at Hewlett Packard. Mr. Bailey
received a Bachelor of Science degree cum laude in electrical engineering and
computer science from Princeton University and an MBA from Harvard
University's Graduate School of Business Administration.
TED SCHLEIN is Vice President, Networking and Client/Server Technology Group
of Symantec. Prior to serving in this position, Mr. Schlein was Vice
President and General Manager, Client/Server Technology Group. Mr. Schlein
has been an employee of Symantec since June 1986, and during that time, he
has served in a variety of management positions including Vice President,
European Business Development; Vice President, Data Management Group; and
Director, Utilities Group. Mr. Schlein holds a Bachelor of Science degree in
economics from the University of Pennsylvania.
DANA E. SIEBERT is Vice President, Worldwide Sales of Symantec. Previously,
Mr. Siebert served as Vice President, Worldwide Services at Symantec. Mr.
Siebert joined Symantec in September 1987. From 1985 to 1987, Mr. Siebert
was a Sales Manager at THINK Technologies where he was responsible for U.S.
corporate, OEM and international sales. Previously, Mr. Siebert held a
number of sales management positions in high technology companies including
Wang Laboratories, Computerland Corporation and Burroughs Corporation. Mr.
Siebert holds a Bachelor of Science degree in business administration from
the University of New Hampshire and is a member of the Software Publishers
Association.
CHRISTOPHER CALISI is Vice President, Communication Products of Symantec.
From 1992 to 1996, Mr. Calisi held several positions within Symantec's Remote
Access Business Unit, including Development Manager, Director of Development
and, most recently, General Manager. Mr. Calisi joined Symantec in 1992 from
Unify Corporation, a relational database and 4GL tools vendor where he served
as the Manager of Sales Engineers. Prior to Unify Corporation, Mr. Calisi
held development positions with several relational database vendors,
including Britton Lee, Oracle and Computer Associates. Mr. Calisi holds a
Bachelor of Science degree from the State University of New York at Empire
State and has received executive training at the Wharton School. Mr. Calisi
holds several copyrights for software innovations from 1981 through 1986 and
is an associate of the IEEE Committee. Mr. Calisi became an executive
officer of Symantec in May 1996.
DEREK WITTE is Vice President, General Counsel and Secretary of Symantec.
Mr. Witte joined Symantec in October 1990. From October 1987 until joining
Symantec, Mr. Witte was Associate General Counsel and later Director of Legal
Services for Claris Corporation, a software subsidiary of Apple. Between
January and October 1987, Mr. Witte was Assistant General Counsel at Worlds
of Wonder, Inc. Previously, Mr. Witte practiced law with the San
32
<PAGE>
Francisco-based law firms of Brobeck, Phleger & Harrison and Heller Ehrman
White and McAuliffe during the periods between 1981 and 1983 and 1983 and
1987, respectively. Mr. Witte holds a law degree and a Bachelor of Arts
degree in Economics from the University of California at Berkeley. Mr. Witte
has been a member of the California bar since 1981.
33
<PAGE>
ITEM 11:EXECUTIVE COMPENSATION.
Information with respect to this Item may be found in the section captioned
"Executive Compensation" appearing in the definitive Proxy Statement to be
delivered to stockholders in connection with the Annual Meeting of
Stockholders to be held on September 25, 1996. Such information is
incorporated herein by reference.
ITEM 12:SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information with respect to this Item may be found in the section captioned
"Security Ownership of Certain Beneficial Owners and Management" appearing in
the definitive Proxy Statement to be delivered to stockholders in connection
with the Annual Meeting of Stockholders to be held on September 25, 1996.
Such information is incorporated herein by reference.
ITEM 13:CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information with respect to this Item may be found in the section captioned
"Executive Compensation - Certain Transactions" appearing in the definitive
Proxy Statement to be delivered to stockholders in connection with the Annual
Meeting of Stockholders to be held on September 25, 1996. Such information
is incorporated herein by reference.
34
<PAGE>
PART IV
ITEM 14:EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
Upon written request, the Company will provide, without charge, a copy of the
Company's annual report on Form 10-K, including the consolidated financial
statements, financial statement schedules and any exhibits for the Company's
most recent fiscal year. All requests should be sent to:
Lori A. Barker
Investor Relations
Symantec Corporation
10201 Torre Avenue
Cupertino, California 95014-2132
408-446-8990
(a) The following documents are filed as part of this report:
PAGE
NUMBER
1. CONSOLIDATED FINANCIAL STATEMENTS. ------
Report of Ernst & Young LLP, Independent Auditors. . . . . . . 40
Report of Price Waterhouse, Independent Auditors . . . . . . . 41
Consolidated Balance Sheets as of March 31, 1996 and 1995. . . 42
Consolidated Statements of Operations for the Years Ended
March 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . 43
Consolidated Statements of Stockholders' Equity for the Years
Ended March 31, 1996, 1995 and 1994 . . . . . . . . . . . . 44
Consolidated Statements of Cash Flow for the Years Ended
March 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . 45
Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements. . . . . . . . . . . . . . . 46
2. FINANCIAL STATEMENT SCHEDULES. The following financial statement schedule
of Symantec Corporation for the years ended March 31, 1996, 1995 and 1994
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 . . . . . . . . . . . 61
Schedules other than that listed above have been omitted since they are
either not required, not applicable, or the information is otherwise
included.
3. EXHIBITS. The following exhibits are filed as part of, or incorporated by
reference into, this Form 10-K:
3.01 The Registrant's Restated Certificate of Incorporation. (Incorporated
by reference to Annex G filed with the Registrant's Joint
Management Information Circular and Proxy Statement (No. 000-17781)
dated October 17, 1995.)
3.02 The Registrant's Bylaws, as currently in effect. (Incorporated by
reference to Exhibit 3.02 filed with the Registrant's Registration
Statement on Form S-1 (No. 33-28655) originally filed May 19, 1989,
and amendment No. 1 thereto filed June 21, 1989, which Registration
Statement became effective June 22, 1989.)
4.01 Registration Rights Agreement. (Incorporated by reference to Exhibit
4.02 filed with the Registrant's Registration Statement on Form S-4
(No. 33-35385) initially filed June 13, 1990.)
4.02 Amendment No. One to Registration Rights Agreement (Incorporated by
reference to Exhibit 4.03 filed with the Registrant's Annual Report
on Form 10-K for the year ended April 2, 1993.)
35
<PAGE>
4.03 Amendment No. Two to Registration Rights Agreement (Incorporated by
reference to Exhibit 4.04 filed with the Registrant's Annual Report
on Form 10-K for the year ended April 2, 1993.)
4.04 Plan of Arrangement and Exchangeable Share Provisions related to the
acquisition of Delrina. (Incorporated by reference to Annex D
filed with the Registrant's Joint Management Information Circular
and Proxy Statement dated October 17, 1995.)
4.05 Support Agreement dated July 5, 1995 between Symantec and Delrina.
(Incorporated by reference to Annex E filed with the Registrant's
Joint Management Information Circular and Proxy Statement dated
October 17, 1995.)
4.06 Form of Voting and Exchange Trust Agreement dated July 5, 1996 between
Symantec and Delrina. (Incorporated by reference to Annex F filed
with the Registrant's Joint Management Information Circular and
Proxy Statement dated October 17, 1995.)
10.01 Amended Agreement Respecting Certain Rights of Publicity. (Incorporated
by reference to Exhibit 10.04 filed with the Registrant's
Registration Statement on Form S-4 (No. 33-35385) initially filed
June 13, 1990.)
10.02 Non-Competition and Non-Solicitation Agreement between Registrant and
Peter Norton and Ronald Posner. (Incorporated by reference to
Exhibit 10.06 filed with the Registrant's Registration Statement
on Form S-4 (No. 33-35385) initially filed June 13, 1990.)
10.03* 1988 Employees Stock Option Plan, as amended to date. (Incorporated by
reference to Exhibit 4.02 filed with the Registrant's Registration
Statement on Form S-8 (No. 33-88694) filed January 23, 1995.)
10.04* 1989 Employee Stock Purchase Plan, as amended to date. (Incorporated
by reference to Exhibit 4.01 filed with the Registrant's
Registration Statement on Form S-8 (No.33-88694) filed January 23,
1995.)
10.05* Form of Stock Option Agreement and Form of Stock Option Exercise
Request, as currently in effect, under the Registrant's 1988
Employees Stock Option Plan. (Incorporated by reference to Exhibit
10.10 filed with the Registrant's Registration Statement on Form
S-4 (No. 33-35385) initially filed June 13, 1990.)
10.06* 1988 Directors Stock Option Plan, as amended to date. (Incorporated
by reference to Exhibit 10.09 filed with the Registrant's Annual
Report on Form 10-K for the year ended April 2, 1993.)
10.07* 1993 Directors Stock Option Plan, as amended. (Incorporated by
reference to Exhibit 10.07 filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994)
10.08* Form of Stock Option Grant and Stock Option Exercise Notice and
Agreement under the Registrant's 1988 Directors Stock Option Plan.
(Incorporated by reference to Exhibit 10.12 filed with the
Registrant's Registration Statement on Form S-4 (No.33-35385)
initially filed June 13, 1990.)
10.09* 1994 Patent Incentive Plan. (Incorporated by reference to Exhibit
4.01 filed with the Registrant's Registration Statement on Form S-8
(No. 33-60141) filed June 9, 1995.)
10.10* 1996 Equity Incentive Plan. (Incorporated by reference to Exhibit A
filed with the Registrant's Proxy Statement dated March 26, 1996.)
10.11 Office building lease dated as of August 1, 1991, between Lincoln Town
Center and Symantec Corporation regarding property located in
Cupertino, California. (Incorporated by reference to Exhibit 10.11
filed with the Registrant's Annual Report on Form 10-K for the year
ended April 2, 1993.)
10.12 Addendum No. 4 to Office Building Lease By and Between Lincoln Property
Company N.C., Inc. and Symantec Corporation Dated August 1, 1991.
(Incorporated by reference to Exhibit 10.13 filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1993.)
10.13 Office building lease dated as of April 10, 1991, between the Registrant
and Maguire Thomas Partners Colorado Place regarding property
located in Santa Monica, California. (Incorporated by reference to
Exhibit 10.25 filed with the Registrant's Annual Report on Form
10-K for the year ended March 31, 1991.)
- ------------------------
*Indicates a management contract or compensatory plan or arrangement.
36
<PAGE>
10.14 Office building lease dated as of February 27, 1991, between the
Registrant and Kim Camp No. VII regarding property located in
Sunnyvale, California. (Incorporated by reference to Exhibit 10.26
filed with the Registrant's Annual Report on Form 10-K for the year
ended March 31, 1991.)
10.15 Office building lease dated as of April 19, 1995, between the Registrant
and CIGNA Property and Casualty Insurance Company regarding property
located in Cupertino, California. (Incorporated by reference to
Exhibit 10.16 filed with the Registrant's Annual Report on Form 10-K
for the year ended March 31, 1995.)
10.16 Office building lease, as amended, dated as of December 1, 1995 between
Delrina (Canada) Corporation and Sherway Centre Limited regarding
property located in Toronto, Canada. (Incorporated by reference to
Exhibit 10.01 filed with the Registrants Quarterly Report on Form
10-Q for the quarter ended December 29, 1995.)
10.17 Form of Indemnity Agreement with Officers and Directors. (Incorporated
by reference to Exhibit 10.17 filed with the Registrant's
Registration Statement on Form S-1 (No.33-28655) originally filed
May 19, 1989, and amendment No. 1 thereto filed June 21, 1989, which
Registration Statement became effective June 22, 1989.)
10.18* Full Recourse Promissory Note and Pledge Agreement between the Company
and Gordon E. Eubanks, Jr. (Incorporated by reference to Exhibit
10.19 filed with the Registrant's Annual Report on Form 10-K for
the year ended April 2, 1993.)
10.19* Form of Promissory Note and Pledge Agreement between the Company and
certain executives. (Incorporated by reference to Exhibit 10.20
filed with the Registrant's Annual Report on Form 10-K for the
year ended April 2, 1993.)
10.20* Form of Housing Assistance Agreement between the Company and certain
executives. (Incorporated by reference to Exhibit 10.26 filed with
the Registrant's Registration Statement on Form S-4 (No. 33-35385)
initially filed June 13, 1990.)
10.21 Agreement and Plan of Reorganization between Symantec Acquisition Corp.
and Fifth Generation Systems, Inc. dated August 30, 1993 and related
Agreement of Merger. (Incorporated by reference to Exhibit 2.01
filed with the Registrant's Current Report on Form 8-K filed
October 19, 1993.)
10.22 Agreement and Plan of Reorganization by and among Symantec
Corporation, Symantec Acquisition Corp. and Central Point Software,
Inc. dated March 31, 1994. (Incorporated by reference to Exhibit
10.27 filed with the Registrant's Annual Report on Form 10-K for the
year ended April 1, 1994.)
10.23 Agreement of Purchase and Sale of Assets among DataEase International,
Inc., DataEase Sapphire International Group, N.V. and Symantec
Corporation dated September 2, 1993. (Incorporated by reference to
Exhibit 10.31 filed with the Registrant's Quarterly Report of Form
10-Q for the quarter ended December 31, 1993.) (Confidential
treatment has been granted with respect to portions of this
exhibit.)
10.24 Note Purchase Agreement, dated April 2, 1993, among Symantec
Corporation, Morgan Guaranty Trust Company of New York, as Trustee,
J. P. Morgan Investments Management, Inc., as Investment Manager
and The Northwestern Mutual Life Insurance Company, including Form
of Convertible Subordinated Notes. (Incorporated by reference to
Exhibit 10.30 filed with the Registrant's Annual Report on Form
10-K for the year ended April 2, 1993.)
10.25* The Registrant's Section 401(k) Plan, as amended. (Incorporated by
reference to Exhibit 10.25 filed with the Registrants Annual Report
on Form 10-K for the year ended March 31, 1995.)
10.26* Form of Executive Compensation Agreement between the Company and certain
executives. (Incorporated by reference to Exhibit 10.25 filed with
the Registrants Annual Report on Form 10-K for the year ended March
31, 1995.)
10.27 Assignment of Copyright and Other Intellectual Property Rights.
(Incorporated by reference to appendix to Prospectus/Proxy Statement
filed with the Registrant's Registration Statement on Form S-4
(No. 33-35385) initially filed June 13, 1990.)
- ------------------------
*Indicates a management contract or compensatory plan or arrangement.
37
<PAGE>
10.28* Employment and Consulting Agreement among Symantec Corporation,
Symantec Acquisition Corp. and Charles M. Boesenberg.
(Incorporated by reference to Exhibit 10.32 filed with the
Registrant's Annual Report of Form 10-K for the year ended April 1,
1994.) (Confidential treatment has been granted with respect to
portions of this exhibit.)
10.29* Stock Option Grant between the Company and Charles Boesenberg.
(Incorporated by reference to Exhibit 10.29 filed with the
Registrants Annual Report on Form 10-K for the year ended
March 31, 1995.)
10.30 Authorized Distributor Agreement between Symantec Corporation and
Ingram Micro, Inc. (Incorporated by reference to Exhibit 10.34
filed with the Registrant's Quarterly Report of Form 10-Q for the
quarter ended July 1, 1994.) (Confidential treatment has been
granted with respect to portions of this exhibit.)
10.31 Authorized Distributor Agreement between Symantec Corporation and
Merisel Americas, Inc. (Incorporated by reference to Exhibit
10.35 filed with the Registrant's Quarterly Report of Form 10-Q
for the quarter ended July 1, 1994.) (Confidential treatment has
been granted with respect to portions of this exhibit.)
10.32 Stipulation of Settlement in the case of Ayln J. Scheatzle, et al. vs.
Gordon E. Eubanks, Jr., et al. and Symantec Corporation.
(Incorporated by reference to Exhibit 10.36 filed with the
Registrant's Quarterly Report of Form 10-Q for the quarter ended
July 1, 1994.)
10.33* Employment and Non-competition Agreement between Symantec Corporation
and Dennis Bennie. (Incorporated by reference to Exhibit 10.02
filed with the Registrants Quarterly Report on Form 10-Q for the
quarter ended December 29, 1995.)
10.34 Combination Agreement between Symantec Corporation and Delrina
Corporation dated July 5, 1995. (Incorporated by reference to
Exhibit 10.01 filed with the Registrants Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995.)
10.35 Class action complaint filed by the law firm of Milberg Weiss Bershad
Hynes & Lerach in Superior Court of the State of California, County
of Santa Clara against the Company and several of its current and
former officers and directors.
11.01 Computation of Net Income (Loss) Per Share.
21.01 Subsidiaries of the Registrant.
23.01 Consent of Ernst & Young LLP, Independent Auditors.
23.02 Consent of Price Waterhouse, Independent Auditors.
27.01 Financial Data Schedule.
(b) Reports on Form 8-K
None
(c) Exhibits:
The Registrant hereby files as part of this Form 10-K the exhibits listed
in Item 14(a)3, as set forth above.
(d) Financial Statement Schedules:
The Registrant hereby files as part of this Form 10-K the schedule listed
in Item 14(a)2, as set forth on page 61.
- -------------------------
*Indicates a management contract or compensatiory plan or arrangement.
38
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Ernst & Young LLP, Independent Auditors. . . . . . . . . . . . 40
Report of Price Waterhouse, Independent Auditors . . . . . . . . . . . . 41
Consolidated Balance Sheets as of March 31, 1996 and 1995. . . . . . . . 42
Consolidated Statements of Operations for the years ended
March 31, 1996, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . . 43
Consolidated Statements of Stockholders' Equity for the years ended
March 31, 1996, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . . 44
Consolidated Statements of Cash Flow for the years ended
March 31, 1996, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . . 45
Summary of Significant Accounting Policies . . . . . . . . . . . . . . . 46
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . 49
39
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Symantec Corporation
We have audited the accompanying consolidated balance sheets of Symantec
Corporation as of March 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended March 31, 1996. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audits. We did
not audit the financial statements or schedule of Delrina Corporation, which
statements reflect total assets and net income constituting 29% and 14%,
respectively, of the related 1995 consolidated financial statement totals,
and which statements reflect net income of approximately $12.7 million
related to the 1994 consolidated net loss. Those statements were audited by
other auditors whose report has been furnished to us, and our opinion,
insofar as it relates to data included for Delrina Corporation, is based
solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. 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 and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Symantec Corporation at
March 31, 1996 and 1995, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended March 31,
1996, in conformity with generally accepted accounting principles. Also, in
our opinion, based upon our audits and the report of other auditors, 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.
ERNST & YOUNG LLP
San Jose, California
April 24, 1996
40
<PAGE>
INDEPENDENT AUDITORS' REPORT
August 8, 1995
Auditors' Report
To the Shareholders of Delrina Corporation
We have audited the consolidated balance sheet of Delrina Corporation as at June
30, 1995 and the consolidated statements of operations, retained earnings
(deficit) and changes in financial position for the years ended June 30, 1995
and 1994, all expressed in Canadian dollars. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the consolidated financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the consolidated 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of Delrina Corporation as at June 30,
1995 and the results of its operations and the changes in its financial position
for the years ended June 30, 1995 and 1994 in accordance with generally accepted
accounting principles in Canada.
PRICE WATERHOUSE
Chartered Accountants
41
<PAGE>
SYMANTEC CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
-----------------------
(In thousands) 1996 1995
- -------------------------------------------------------------------- -------- --------
ASSETS
- ------
<S> <C> <C>
Current assets:
Cash and short-term investments $129,199 $131,795
Trade accounts receivable 72,256 81,261
Inventories 7,893 9,433
Deferred income taxes 12,875 11,869
Other 14,639 8,392
-------- --------
Total current assets 236,862 242,750
Equipment and leasehold improvements 51,698 39,379
Purchased intangibles 518 11,122
Other 8,851 16,381
-------- --------
$297,929 $309,632
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 23,368 $ 25,394
Accrued compensation and benefits 14,888 13,482
Other accrued expenses 60,566 57,939
Income taxes payable 3,329 2,006
Current portion of long-term obligations 68 524
-------- --------
Total current liabilities 102,219 99,345
Convertible subordinated debentures 15,000 25,000
Long-term obligations 393 413
Commitments and contingencies
Stockholders' equity:
Preferred stock (authorized: 1,000; issued and outstanding: none) -- --
Common stock (authorized: 100,000; issued and outstanding: 53,636
and 50,782 shares) 536 508
Capital in excess of par value 279,508 248,766
Notes receivable from stockholders (144) (144)
Cumulative translation adjustment (7,591) (7,213)
Accumulated deficit (91,992) (57,043)
-------- --------
Total stockholders' equity 180,317 184,874
-------- --------
$297,929 $309,632
-------- --------
-------- --------
</TABLE>
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are an integral part of these statements.
42
<PAGE>
SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------
(In thousands, except net income (loss) per share) 1996 1995 1994
- ----------------------------------------------------------- --------- -------- --------
<S> <C> <C> <C>
Net revenues $ 445,432 $431,268 $403,206
Cost of revenues 108,975 90,935 102,018
--------- -------- --------
Gross margin 336,457 340,333 301,188
Operating expenses:
Research and development 94,672 70,706 68,110
Sales and marketing 229,703 190,439 189,962
General and administrative 32,744 29,357 34,312
Acquisition, restructuring and
other expenses 27,617 9,545 56,094
--------- -------- --------
Total operating expenses 384,736 300,047 348,478
--------- -------- --------
Operating income (loss) (48,279) 40,286 (47,290)
Interest income 7,512 5,648 2,436
Interest expense (1,495) (2,419) (2,517)
Other income (expense), net (2,130) 1,041 1,697
--------- -------- --------
Income (loss) before income taxes (44,392) 44,556 (45,674)
Provision (benefit) for income taxes (4,609) 11,147 (1,253)
--------- -------- --------
Net income (loss) $ (39,783) $ 33,409 $(44,421)
--------- -------- --------
--------- -------- --------
Net income (loss) per share - primary $ (0.76) $ 0.65 $ (0.96)
--------- -------- --------
--------- -------- --------
Net income (loss) per share - fully diluted $ (0.76) $ 0.61 $ (0.96)
--------- -------- --------
--------- -------- --------
Shares used to compute net income (loss) per share - primary 52,664 52,181 46,270
--------- -------- --------
--------- -------- --------
Shares used to compute net income (loss) per share - fully diluted 52,664 56,491 46,270
--------- -------- --------
--------- -------- --------
</TABLE>
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are an integral part of these statements.
43
<PAGE>
SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Notes
Capital in Receivable Cumulative Total
Common Excess of from Translation Accumulated Stockholders'
(In thousands) Stock Par Value Stockholders Adjustment Deficit Equity
- ---------------------------------------- ------ ---------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances, March 31, 1993 $449 $170,783 $(350) $(3,587) $(28,238) $139,057
Net loss -- -- -- -- (44,421) (44,421)
Fifth Generation net loss for the
quarter ended March 31, 1993 -- -- -- -- (16,390) (16,390)
XTree net loss for the six months
ended March 31, 1993 -- -- -- -- (1,040) (1,040)
Issued 915 shares in connection with
Delrina's initial public offering 9 30,035 30,044
Issued common stock:
2,235 shares under stock plans
and other 22 15,646 -- -- -- 15,668
391 shares for acquisition of
product rights 4 6,496 -- -- -- 6,500
Repayments on notes -- -- 201 -- -- 201
Other equity transactions of
acquired companies -- 3,041 -- -- -- 3,041
Translation adjustment -- -- -- (3,467) -- (3,467)
---- -------- ----- ------- -------- --------
Balances, March 31, 1994 484 226,001 (149) (7,054) (90,089) 129,193
Net income -- -- -- -- 33,409 33,409
Acquisition of Intec and SLR:
Issued 303 shares of common stock 3 38 -- -- -- 41
Accumulated deficit -- -- -- -- (363) (363)
Issued common stock:
2,147 shares under stock plans
and other 21 21,351 -- -- -- 21,372
Repayments on notes -- -- 5 -- -- 5
Issued 57 shares to acquire subsidiary -- 1,376 -- -- -- 1,376
Translation adjustment -- -- -- (159) -- (159)
---- -------- ----- ------- -------- --------
Balances, March 31, 1995 508 248,766 (144) (7,213) (57,043) 184,874
Net loss -- -- -- -- (39,783) (39,783)
Delrina net loss for the quarter
ended June 30, 1995 -- -- -- -- 4,834 4,834
Issued common stock:
2,021 shares under stock plans
and other 20 21,101 -- -- -- 21,121
833 shares from conversion of
convertible debentures 8 9,641 -- -- -- 9,649
Translation adjustment -- -- -- (378) -- (378)
---- -------- ----- ------- -------- --------
Balances, March 31, 1996 $536 $279,508 $(144) $(7,591) $(91,992) $180,317
---- -------- ----- ------- -------- --------
---- -------- ----- ------- -------- --------
</TABLE>
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are an integral part of these statements.
44
<PAGE>
SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------
(In thousands) 1996 1995 1994
- ----------------------------------------------------------- --------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (39,783) $ 33,409 $(44,421)
Delrina net loss for the quarter ended June 30, 1995 4,834 -- --
Fifth Generation net loss for the quarter ended March 31, 1993 -- -- (16,390)
XTree net loss for the six months ended March 31, 1993 -- -- (1,040)
Acquired companies' net assets -- (1,677) --
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization of equipment and
leasehold improvements 19,717 15,689 16,293
Amortization and write-off of capitalized software costs 19,141 13,360 20,539
Write-off of equipment and leasehold improvements 3,403 1,539 4,403
Deferred income taxes (989) 7,267 832
Net change in assets and liabilities:
Trade accounts receivable 8,053 (14,686) (6,605)
Inventories 1,450 1,308 (3,155)
Other current assets (6,419) 3,980 10,201
Other assets (821) (7,698) (3,345)
Accounts payable (2,368) (11,224) (663)
Accrued compensation and benefits 1,313 (1,042) 3,649
Accrued other expenses 2,256 (2,098) 28,700
Income taxes payable 1,211 78 (2,089)
--------- -------- --------
Net cash provided by operating activities 10,998 38,205 6,909
--------- -------- --------
INVESTING ACTIVITIES:
Capital expenditures (35,767) (24,749) (13,700)
Purchased intangibles (461) (4,293) (4,419)
Purchases of short-term, available-for-sale investments (154,500) (166,524) (102,045)
Maturities of short-term, available-for-sale investments 168,681 122,736 46,732
Sales of fixed assets and other -- (1,505) 125
--------- -------- --------
Net cash used in investing activities (22,047) (74,335) (73,307)
--------- -------- --------
FINANCING ACTIVITIES:
Principal payments on long-term obligations (475) (889) (12,459)
Net proceeds from sales of common stock and other 20,770 21,395 47,969
--------- -------- --------
Net cash provided by financing activities 20,295 20,506 35,510
--------- -------- --------
Effect of exchange rate fluctuations on cash and cash equivalents 2,339 (2,263) (2,094)
Increase (decrease) in cash and cash equivalents 11,585 (17,887) (32,982)
Beginning cash and cash equivalents 30,192 48,079 81,061
--------- -------- --------
Ending cash and cash equivalents $ 41,777 $ 30,192 $ 48,079
--------- -------- --------
--------- -------- --------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Income taxes paid (net of refunds) during the year $ 906 $ (759) $ (3,612)
Interest paid on convertible subordinated debentures and
long-term obligations $ 1,299 $ 2,070 $ 1,891
</TABLE>
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are an integral part of these statements.
45
<PAGE>
SYMANTEC CORPORATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
BUSINESS
Symantec develops, markets and supports a diversified line of application and
system software products designed to enhance individual and workgroup
productivity as well as manage networked computing environments. Principal
products include advanced utilities, security utilities, network/communications
utilities, fax, contact management, development tools and consumer/productivity
applications. Customers consist primarily of corporations, higher education
institutions, government agencies and individual users, which are mainly located
in North America, Europe, Asia/Pacific and Latin America.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Symantec Corporation and its wholly-owned subsidiaries ("Symantec" or the
"Company"). All significant intercompany accounts and transactions have been
eliminated.
BASIS OF PRESENTATION
During fiscal 1996, 1995 and 1994, Symantec acquired various companies in
transactions accounted for as poolings of interest. Accordingly, all financial
information has been restated to reflect the combined operations of Symantec and
the acquired companies with the exception of Intec Systems Corporation and SLR
Systems, Inc. The results of operations of Intec and SLR were not material to
Symantec's consolidated financial statements, and therefore, amounts prior to
the year of acquisition were not combined with Symantec's financial statements.
Symantec has a 52/53-week fiscal accounting year. Accordingly, all references
as of and for the periods ended March 31, 1996, 1995 and 1994 reflect amounts as
of and for the periods ended March 29, 1996, March 31, 1995 and April 1, 1994,
respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION
In general, the functional currency of the Company's 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 cumulative
translation adjustments resulting from this process are shown separately as a
component of stockholders' equity. Revenues and expenses are translated using
average exchange rates prevailing during the year. Foreign currency transaction
gains and losses are not material and are included in the determination of net
income (loss).
REVENUE RECOGNITION
Symantec recognizes revenue upon shipment when no significant vendor obligations
remain and collection of the receivable, net of provisions for estimated future
returns, is probable. Prior to fiscal 1994, Central Point generally recognized
revenue upon shipment, along with a provision for estimated returns. Due to
significant changes in the market's perception of Central Point's long-term
viability and the Agreement and Plan of Reorganization signed by Symantec and
Central Point in fiscal 1994, Central Point was no longer able to reasonably
estimate future returns from distributors and resellers. In accordance with
Statement of Financial Accounting Standards No. 48, revenue and the related cost
of revenue for 1994 for software shipments to these distributors and resellers
was deferred until sold by the distributor or reseller to the end user. This
revenue and cost of revenue deferral resulted in a decrease in North American
net revenues of approximately $5.0 million and international net revenues of
approximately $10.0 million and an increase in the fiscal 1994 loss before
provision for income taxes of approximately $12.3 million. Symantec later
analyzed returns related to the Central Point products for the prior eight
quarters to determine when such products were being sold through to end users.
As the result of this analysis of the remaining Central Point products in the
distribution channel, Symantec recognized approximately $3.0 million of North
American net revenues in the March 1995 quarter and $7.2 million of
international net revenues in the June 1995 quarter that had been previously
deferred by Central Point.
Revenues related to significant post-contract support agreements (generally
product maintenance agreements) are deferred and recognized over the period of
the agreements. The estimated cost of providing insignificant post-
46
<PAGE>
SYMANTEC CORPORATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
contract support (generally telephone support) is accrued at the time of the
sale and is included in sales and marketing expense. Technical support costs
included in sales and marketing expense were $34.5 million, $28.0 million and
$26.8 million in fiscal 1996, 1995 and 1994, respectively.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Symantec considers investments in highly liquid instruments purchased with an
original maturity of 90 days or less to be cash equivalents. All of the
Company's cash equivalents and short-term investments, consisting principally of
commercial paper, corporate notes and certificates of deposit, are classified as
available-for-sale as of the balance sheet date. These securities are reported
at amortized cost, which approximates fair value, and therefore, there are no
unrealized gains and losses included in stockholders' equity. Realized gains
and losses and declines in value judged to be other-than-temporary are included
in interest income. The cost of securities sold is based upon the specific
identification method.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is principally
determined using currently adjusted standards, which approximate actual cost on
a first-in, first-out basis.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are stated at cost, net of accumulated
depreciation and amortization. Depreciation and amortization is provided on a
straight-line basis over the estimated useful lives of the respective assets,
generally the shorter of the lease term or three to seven years.
PURCHASED INTANGIBLES
Purchased intangibles are comprised of acquired software ("product rights") and
are stated at cost less accumulated amortization. Amortization is provided on
the greater of the straight-line basis over the estimated useful lives of the
respective assets, generally three to five years, or on the basis of the ratio
of current revenues to current revenues plus anticipated future revenues.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenditures are charged to operations as incurred.
Financial accounting rules requiring capitalization of certain software
development costs have not materially affected the Company, except for amounts
capitalized by Delrina prior to its acquisition by Symantec. Delrina did not
capitalize any software development costs in fiscal 1996 and capitalized $6.3
million and $2.6 million in software development costs in fiscal years 1995 and
1994, respectively. The related amortization expense was $5.6 million, $4.0
million and $1.9 million in fiscal 1996, 1995 and 1994, respectively.
INCOME TAXES
Income taxes are computed in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes."
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is calculated using the treasury stock or the
modified treasury stock method, as applicable, if dilutive. Common stock
equivalents are attributable to outstanding stock options. Fully diluted
earnings per share includes the assumed conversion of all of the outstanding
convertible subordinated debentures.
CONCENTRATIONS OF CREDIT RISK
The Company's product revenues are concentrated in the personal computer
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
the Company's revenue and net income is derived from international sales and
independent agents and distributors. Fluctuations of the U.S. dollar against
foreign currencies, changes in local regulatory or economic conditions, piracy
or nonperformance by independent agents or distributors could adversely affect
operating results.
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of short-term investments and trade accounts
receivable. The Company's investment portfolio is diversified and
47
<PAGE>
SYMANTEC CORPORATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
consists of investment grade A-1/P-1 securities. The credit risk in the
Company's trade accounts receivable is substantially mitigated by the Company's
credit evaluation process, reasonably short collection terms and the
geographical dispersion of sales transactions.
ADVERTISING
Advertising expenditures are charged to operations as incurred except for
certain direct mail campaigns which are capitalized and amortized over the
expected period of benefit or twelve months, whichever is shorter. Capitalized
advertising costs have not been material in all periods presented. Advertising
expense for fiscal 1996, 1995 and 1994 was approximately $43.0 million, $41.0
million and $38.6 million, respectively.
RECENT PRONOUNCEMENTS
During March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("SFAS No. 121"), which requires the review for
impairment of long-lived assets, certain identifiable intangibles and goodwill
related to those assets whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In certain
situations, an impairment loss would be recognized. The Company does not
believe that adoption of SFAS No. 121, which will become effective for the
Company's 1997 fiscal year, will have a material impact on its financial
condition or operating results.
During October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). This
standard, which establishes a fair value-based method for stock-based
compensation plans, also permits an election to continue following the
requirements of APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
with disclosures of pro-forma net income and earnings per share under the new
method. The Company will continue following the requirements of APB Opinion No.
25, with disclosure of pro-forma information. The disclosure requirements of
SFAS No. 123 will be effective for the Company's 1997 fiscal year.
RECLASSIFICATIONS
Certain previously reported amounts have been reclassified to conform to the
current presentation format.
48
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
March 31,
-----------------------------
(In thousands) 1996 1995
- ----------------------------------------------- ---------- ----------
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS:
<S> <C> <C>
Cash $ 20,176 $ 19,745
Cash equivalents 21,601 10,447
Short-term investments 87,422 101,603
---------- ----------
$ 129,199 $ 131,795
---------- ----------
---------- ----------
TRADE ACCOUNTS RECEIVABLE:
Receivables $ 77,272 $ 86,113
Less: allowance for doubtful accounts (5,016) (4,852)
---------- ----------
$ 72,256 $ 81,261
---------- ----------
---------- ----------
INVENTORIES:
Raw materials $ 1,969 $ 3,715
Finished goods 5,924 5,718
---------- ----------
$ 7,893 $ 9,433
---------- ----------
---------- ----------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Computer equipment $ 79,153 $ 59,818
Office furniture and equipment 25,753 23,614
Leasehold improvements 12,603 9,609
---------- ----------
117,509 93,041
Less: accumulated depreciation and amortization (65,811) (53,662)
---------- ----------
$ 51,698 $ 39,379
---------- ----------
---------- ----------
PURCHASED INTANGIBLES:
Product rights $ 8,680 $ 49,439
Less: accumulated amortization (8,162) (38,317)
---------- ----------
$ 518 $ 11,122
---------- ----------
---------- ----------
OTHER ACCRUED EXPENSES:
Acquisition and restructuring expenses $ 7,833 $ 8,614
Deferred revenue 26,266 22,892
Marketing development funds 11,412 8,719
Other 15,055 17,714
---------- ----------
$ 60,566 $ 57,939
---------- ----------
---------- ----------
</TABLE>
49
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 2. BUSINESS COMBINATIONS AND PURCHASED PRODUCT RIGHTS
During the three fiscal years ended March 31, 1996, Symantec completed
acquisitions of the following companies:
<TABLE>
<CAPTION>
Shares of Acquired
Symantec Company
Common Stock
Stock Options
Companies Acquired Date Acquired Issued Assumed
- --------------------------------------------------- ----------------- ----------- ---------
<S> <C> <C>
Delrina Corporation ("Delrina") November 22, 1995 13,684,174* 1,271,677
Intec Systems Corporation ("Intec") August 31, 1994 133,332 --
Central Point Software, Inc. ("Central Point") June 1, 1994 4,029,429 707,452
SLR Systems, Inc. ("SLR") May 31, 1994 170,093 --
Fifth Generation Systems, Inc. ("Fifth Generation") October 4, 1993 2,769,010 --
Contact Software International, Inc. ("Contact") June 2, 1993 2,404,019 232,589
</TABLE>
* Includes Delrina exchangeable stock that is traded on the Toronto Stock
Exchange. Delrina stockholders received Delrina exchangeable stock in
exchange for Delrina common shares at a rate of 0.61 per share. Delrina
exchangeable stock may be converted at any time into Symantec common stock
on a one-for-one basis at each stockholder's option.
All of these acquisitions were accounted for as poolings of interest. In
connection with the acquisitions of the companies listed above, Symantec
incurred significant acquisition expenses (See Note 10). Due to differing year
ends of Symantec, Delrina and Fifth Generation, financial information for
dissimilar fiscal year ends was combined. Delrina's fiscal years ended June 30,
1995 and 1994 were combined with Symantec's fiscal years ended March 31, 1995
and 1994, respectively. Accordingly, Delrina's results of operations for the
quarter ended June 30, 1995 were duplicated in the combined statements of
operations for fiscal 1996 and 1995 and Delrina's net loss for the quarter ended
June 30, 1995 was credited to stockholder's equity. Delrina reported net
revenues of $19.8 million and net loss of $4.8 million in the quarter ended June
30, 1995. Fifth Generation's fiscal year ended December 31, 1992 was combined
with Symantec's fiscal year ended March 31, 1993. Accordingly, Fifth
Generation's results of operations for the quarter ended March 31, 1993 were
charged to stockholders' equity. Fifth Generation's net loss of $16.4 million
for the quarter ended March 31, 1993 was largely due to the decline in net
revenues to $1.9 million and the write-off of previously capitalized software
costs.
50
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The table below sets forth the composition of combined net revenues and net
income (loss) for the pre-acquisition periods indicated. Information for the
year ended March 31, 1996 with respect to Delrina reflects the period ended
November 22, 1995, the date Delrina was acquired.
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------
(IN THOUSANDS) 1996 1995 1994
- --------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Net revenues:
Symantec $ 420,013 $ 334,867 $ 328,299
Delrina 25,419 96,401 74,907
---------- ---------- ----------
$ 445,432 $ 431,268 $ 403,206
---------- ---------- ----------
---------- ---------- ----------
Net income (loss):
Symantec $ (4,291) $ 28,500 $ (56,967)
Delrina (35,492) 4,909 12,546
---------- ---------- ----------
$ (39,783) $ 33,409 $ (44,421)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
On December 31, 1993, Symantec acquired certain technology for developing an
architecture and tools to build client-server applications from DataEase
International, Inc. in exchange for 391,456 shares of Symantec common stock and
cancellation of the principal and accrued interest on a $1.0 million outstanding
note receivable. The Company capitalized approximately $7.7 million of
purchased product rights as a result of this transaction. During fiscal 1996
the Company wrote off the remaining unamortized cost and licensed the product
rights for an immaterial amount.
NOTE 3. CASH EQUIVALENTS, SHORT-TERM INVESTMENTS AND FAIR VALUE OF FINANCIAL
INSTRUMENTS
All cash equivalents and short-term investments have been classified as
available-for-sale securities and are reported at amortized cost, which
approximates fair value, and therefore, no material unrealized gains and losses
have been included in stockholders' equity. As of March 31, 1996 and 1995, the
estimated fair value of these securities consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- ----------------------------------- ---------- ----------
<S> <C> <C>
Taxable commercial paper $ 77,392 $ 99,566
Money market funds 21,601 7,452
Taxable corporate notes 5,022 --
Taxable certificates of deposit 5,008 --
Auction-rate preferred securities -- 5,032
---------- ----------
$ 109,023 $ 112,050
---------- ----------
---------- ----------
</TABLE>
All of the Company's available-for-sale securities as of March 31, 1996 have a
contractual maturity of one year or less. For the year ended March 31, 1996,
there were no material sales of available-for-sale securities. Fair values of
cash, cash equivalents and short-term investments approximate cost due to the
short period to maturity.
Symantec utilizes some natural hedging to mitigate the Company's transaction
exposures, and effective December 31, 1993, the Company commenced hedging some
residual transaction exposures through the use of one-month foreign exchange
forward contracts. The Company enters into foreign exchange forward contracts
with financial institutions primarily to protect against currency exchange risks
associated with certain firmly committed transactions. Fair value of foreign
exchange forward contracts are based on quoted market prices. At
March 31, 1996, there was a total notional amount of approximately $96.5 million
of outstanding foreign exchange forward contracts all of which mature in 35 days
or less. The net liability of forward contracts was a notional amount of
approximately $85.5 million at March 31, 1996. The fair value of foreign
currency exchange forward contracts approximates cost due to the short maturity
periods and the minimal fluctuations in foreign currency exchange rate. The
Company does not hedge its translation risk.
51
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 4. CONVERTIBLE SUBORDINATED DEBENTURES
On April 2, 1993, the Company issued convertible subordinated debentures
totaling $25.0 million. The debentures bear interest at 7.75% payable
semiannually and are convertible into Symantec common stock at $12 per share at
the option of the investor. The debentures are due in three equal annual
installments beginning in 1999 and are redeemable at the option of the investors
in the event of a change in control of Symantec or the sale of all or
substantially all of the assets of the Company. Symantec, at its option, may
redeem the notes at any time on 30 to 60 days notice. The holders are entitled
to certain registration rights relating to the shares of common stock resulting
from the conversion of the debentures. The Company reserved 2,083,333 shares of
common stock to be issued upon conversion of these debentures. The debentures
limit the payment of cash dividends and the repurchase of capital stock to a
total of $10.0 million plus 25% of cumulative net income subsequent to April 2,
1993.
On April 26, 1995, convertible subordinated debentures totaling $10.0 million
were converted into 833,333 shares of Symantec common stock, leaving 1,250,000
shares of common stock reserved for future conversion as of March 31, 1996.
The estimated fair value of the $15.0 million convertible subordinated
debentures was approximately $16.1 million at March 31, 1996. The estimated
fair value was based on the total shares of common stock reserved for issuance
upon conversion of the debentures at the closing price of the Company's common
stock at March 31, 1996, which exceeded the conversion price of $12 per share.
NOTE 5. LINE OF CREDIT
The Company has a $10.0 million bank line of credit that expires in March
1998. The line of credit is available for general corporate purposes and
bears interest at the banks' reference (prime) interest rate (8.25% at March
31, 1996), the U.S. offshore rate plus 1.25%, a CD rate plus 1.25% or LIBOR
plus 1.25%, at the Company's discretion. The line of credit requires bank
approval for the payment of cash dividends. Borrowings under this line are
unsecured and are subject to the Company maintaining certain financial ratios
and profits. The Company was in compliance with the line of credit covenants
as of March 31, 1996. At March 31, 1996, there was approximately $0.4
million of standby letters of credit outstanding under this line of credit.
There were no borrowings outstanding under this line at March 31, 1996.
NOTE 6. COMMITMENTS
Symantec leases all of its facilities and certain equipment under operating
leases that expire at various dates through 2026.
The future fiscal year minimum operating lease commitments were as follows at
March 31, 1996:
(In thousands)
- ---------------------------------------
1997 $ 12,749
1998 11,738
1999 8,257
2000 6,980
2001 3,883
Thereafter 12,006
---------
$ 55,613
---------
---------
Rent expense charged to operations totaled $11.3 million, $9.7 million and $9.8
million for the years ended March 31, 1996, 1995 and 1994, respectively.
52
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 7. INCOME TAXES
The components of the provision (benefit) for income taxes were as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------------------------
(In thousands) 1996 1995 1994
- ------------------------------------------- --------- ---------- ----------
Current:
<S> <C> <C> <C>
Federal $ (5,882) $ 998 $ (5,460)
State 130 349 773
International 2,149 2,825 2,248
--------- --------- ---------
(3,603) 4,172 (2,439)
Deferred:
Federal (1,006) 6,431 2,063
State -- 1,761 (425)
International -- (1,217) (452)
--------- --------- ---------
(1,006) 6,975 1,186
--------- --------- ---------
$ (4,609) $ 11,147 $ (1,253)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The difference between the Company's effective income tax rate and the federal
statutory income tax rate as a percentage of income (loss) before income taxes
was as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Federal statutory rate (35.0)% 35.0% (34.0)%
State taxes, net of federal benefit 0.3 3.3 (1.6)
Non-deductible acquisition expenses 6.8 2.6 2.8
Non-deductible acquired in-process R&D -- 1.1 --
Benefit of pre-acquisition losses of Central Point -- (6.7) --
Impact of international operations -- (11.2) (2.1)
Losses for which no benefit is currently recognizable 16.9 -- --
Valuation allowance -- -- 30.7
Other, net 0.7 1.0 1.5
--------- --------- ---------
(10.3)% 25.1% (2.7)%
--------- --------- ---------
--------- --------- ---------
</TABLE>
The principal components of deferred tax assets were as follows:
<TABLE>
<CAPTION>
March 31,
-----------------------
(In thousands) 1996 1995
- --------------------------------------- -------- --------
<S> <C> <C>
Tax credit carryforwards $ 8,213 $ 7,645
Net operating loss carryforwards 19,813 16,487
Inventory valuation accounts 2,704 1,122
Other reserves and accruals not
currently tax deductible 9,403 5,251
Accrued compensation and benefits 1,916 1,744
Deferred revenue 5,465 2,960
Sales incentive programs 4,054 968
Allowance for doubtful accounts 1,104 825
Acquired software 2,979 3,822
Accrued acquisition, restructuring and other expenses 2,364 2,960
Other 579 (991)
--------- ---------
58,594 42,793
Valuation allowance (45,719) (30,924)
--------- ---------
$ 12,875 $ 11,869
--------- ---------
--------- ---------
</TABLE>
53
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Approximately $19.7 million of the valuation allowance for deferred tax
assets is attributable to stock option deductions, the benefit of which will
be credited to equity when realized. Approximately $18.1 million of the
valuation allowance relates to losses and temporary differences associated
with Delrina and the remaining $7.9 million of the valuation allowance
represents net operating loss and tax credit carryforwards of other acquired
companies that are limited by separate return limitations and under the
"change of ownership" rules of Internal Revenue Code Section 382. The change
in the valuation allowance for the years ended March 31, 1996, 1995 and 1994
were net increases of $14.8 million, $1.6 million and $27.4 million,
respectively.
Pretax income (loss) from international operations was approximately $(4.1)
million, $25.9 million and $18.8 million for the years ended March 31, 1996,
1995 and 1994, respectively.
At March 31, 1996, the Company had tax credit carryforwards of $7.9 million
that expire in fiscal 1997 through 2011 and net operating loss carryforwards
of $50.8 million that expire in fiscal 1999 through 2011.
NOTE 8. EMPLOYEE BENEFITS
401(K) PLAN
Symantec maintains a salary deferral 401(k) plan for all of its domestic
employees. The plan allows employees to contribute up to 15% of their pretax
salary up to the maximum dollar limitation prescribed by the Internal Revenue
Code. Symantec matches 50% of employees' contributions up to 6% of the
employees' eligible compensation. Company contributions under the plan were
$1.5 million, $1.2 million and $1.1 million for the years ended March 31, 1996,
1995 and 1994, respectively.
STOCK PURCHASE PLAN
In October 1989, the Company established the 1989 Employee Stock Purchase Plan
and has reserved 2.0 million shares of common stock for issuance under the plan,
including an increase of 500,000 shares approved by Symantec stockholders in
fiscal 1996. Subject to certain limitations, Symantec employees may purchase,
through payroll deductions of 2 to 10% of compensation, shares of common stock
at a price per share that is the lesser of 85% of the fair market value as of
the beginning of the offering period or the end of the purchase period. As of
March 31, 1996, approximately 1.4 million shares had been issued under the plan.
STOCK OPTION PLANS
As of March 31, 1996, the Company has reserved 14.8 million shares of its common
stock for issuance as incentive and nonqualified stock options to employees,
officers, directors, consultants and independent contractors, including an
increase of 1.0 million shares approved in fiscal 1996 by Symantec's
stockholders for issuance under the 1988 Employees Stock Option Plan. Options
under the Company's option plans may be granted at prices not less than 100% of
fair market value on the date of grant, have a maximum term of ten years and
generally vest over a four-year period. In addition, the Company has reserved
an additional 1.2 million shares of its common stock for issuance under acquired
company option plans and acquired company warrants.
During March 1996, the Board of Directors authorized the Company to offer to
each employee with stock options having an exercise price greater than $13.10
(the "Old Options") the opportunity to cancel the affected grants and receive a
new grant for the same number of shares dated March 4, 1996 (the "New Options").
The New Options have an exercise price equal to $13.10. Under the terms of this
stock option cancellation and regrant, all options began vesting as of the new
grant date and no portion of any regranted option may be exercised until
March 4, 1997. Options representing a total of approximately 2.3 million shares
of common stock were canceled and regranted. The President and Chief Executive
Officer, the Executive Vice President, Worldwide Operations and Chief Financial
Officer, the majority of the members of the Executive Staff, and all members of
the Board of Directors elected to exclude themselves from this stock option
cancellation and regrant.
54
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
On March 4, 1996, the Board of Directors also approved the 1996 Equity Incentive
Plan (the "Plan"), the purpose of which is to provide incentives to attract,
retain and motivate eligible persons whose present and potential contributions
are important to the success of Symantec by offering them an opportunity to
participate in the Company's future performance through awards of options and
stock bonuses. This Plan is intended to replace the 1988 Option Plan, which the
Board terminated as of stockholder approval of the Plan. The Plan will be
administered by either the Board of Directors or a committee appointed by the
Board of Directors. Awards under the Plan may be granted to employees,
officers, directors, consultants, independent contractors and advisors of
Symantec (or of any parent, subsidiary or affiliate of Symantec as the Board of
Directors or committee may determine). On May 14, 1996, the stockholders of
Symantec approved the Plan, including the allocation of approximately 2.7
million shares to be made available for the grant of such awards. As of
March 31, 1996, no awards were outstanding under the Plan.
During fiscal 1996, Symantec also registered 400,000 shares to be issued under
the terms of the 1994 Patent Incentive Plan. The purpose of this plan is to
increase awareness of the increasing importance of patents to Symantec's
business and to provide employees with incentives to pursue patent protection
for new technologies that may be valuable to the Company. The Company's
executive officers are not eligible for awards under the 1994 Patent Incentive
Plan. As of March 31, 1996, approximately 4,000 shares had been issued under
this plan.
Stock option and warrant activity was as follows:
<TABLE>
<CAPTION>
Number Exercise
(In thousands, except exercise price per share) of Shares Price Per Share
- ------------------------------------------------------- ----------------------
<S> <C> <C>
Outstanding at March 31, 1993 7,755 $ 0.05 - $ 64.65
Granted 3,873 0.07 - 35.05
Exercised (1,699) 0.05 - 21.01
Canceled (1,244) 0.05 - 64.65
--------
Outstanding at March 31, 1994 8,685 0.05 - 64.65
Granted 3,799 10.06 - 27.52
Exercised (1,813) 0.05 - 21.42
Canceled (1,682) 0.50 - 64.65
--------
Outstanding at March 31, 1995 8,989 0.50 - 54.95
Granted 5,990 10.31 - 32.88
Exercised (1,601) 0.50 - 24.00
Canceled (3,660) 2.48 - 54.95
--------
Outstanding at March 31, 1996 9,718 0.50 - 39.38
--------
--------
</TABLE>
<TABLE>
<CAPTION>
(In thousands) March 31,
- ---------------------------------------- -------------------
Balances are as follows: 1996 1995
------ ------
<S> <C> <C>
Reserved for issuance 10,418 11,679
Available for future grants 700 2,690
Exercisable and vested 3,894 4,006
Exercised, subject to repurchase 1 1
</TABLE>
NOTE 9. RELATED PARTY TRANSACTIONS
As part of the acquisition of Peter Norton Computing, Incorporated ("Norton") in
fiscal 1991, Symantec assumed Norton's perpetual exclusive license agreement
with Mr. Norton, a member of Symantec's Board of Directors until his resignation
on September 27, 1994, to use his name and image for computer software products.
Under the terms of the license, Mr. Norton is entitled to receive a royalty
equal to the greater of 1% of net sales or 0.4% of the suggested retail price of
products bearing Mr. Norton's name. Mr. Norton may terminate the agreement if
Symantec fails to pay Mr. Norton an average of at least $30,000 of royalties in
any three consecutive years. Royalty expense under the agreement was $2.9
million, $1.9 million and $1.6 million for the years ended March 31, 1996, 1995
and 1994, respectively.
55
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Additionally, in connection with certain indemnification agreements entered into
as part of the acquisition of Norton, Mr. Norton agreed to reimburse Symantec
for certain litigation and acquisition costs in excess of specified amounts.
The net amount payable to Mr. Norton pursuant to these agreements at
March 31, 1996 and 1995 was $0.4 million and $0.3 million, respectively.
NOTE 10. ACQUISITION, RESTRUCTURING AND OTHER EXPENSES
Acquisition, restructuring and other expense consists of the following:
<TABLE>
<CAPTION>
Year Ended March 31,
----------------------------------------
(In thousands) 1996 1995 1994
- ------------------------------------------------------------ ---------- ---------- ----------
<S> <C> <C> <C>
Delrina acquisition $ 22,000 $ -- $ --
Loss on sale of Time Line Solutions Corporation assets 2,653 -- --
Relocation of certain research and development activities 2,229 -- --
SLR acquisition -- 545 --
Central Point acquisition (2,300) 9,000 --
Fifth Generation acquisition -- -- 15,000
Contact acquisition -- -- 7,400
XTree acquisition -- -- 3,514
Centralization and restructuring expense -- -- 4,700
Central Point restructuring charges -- -- 16,025
Purchased in-process research and development -- -- 2,955
Class action lawsuit settlement -- -- 6,500
Legal fees and expenses 2,000 -- --
Other 1,035 -- --
---------- --------- ----------
Total acquisition, restructuring and other expenses $ 27,617 $ 9,545 $ 56,094
---------- --------- ----------
---------- --------- ----------
</TABLE>
In connection with the acquisition of Delrina (See Note 2) in fiscal 1996,
Symantec recorded total acquisition charges of $22.0 million, which included
$8.8 million for legal, accounting and financial advisory services, $6.4 million
for the elimination of duplicative and excess facilities and equipment, $3.7
million for personnel severance and outplacement expenses and $3.1 million for
the consolidation and discontinuance of certain operational activities and other
acquisition-related expenses.
In November, 1995, Symantec sold the assets of Time Line Solutions Corporation,
a wholly-owned subsidiary, to a group comprised of Time Line Solution
Corporation's management and incurred a $2.7 million loss on the sale.
During fiscal 1996, Symantec expensed $1.0 million, which included a loss on the
sale of certain assets and liabilities of a subsidiary and other expenses.
In February 1995, Symantec announced a plan to consolidate certain research and
development activities. This plan was designed to gain greater synergy between
the Company's Third Generation Language and Fourth Generation Language
development groups. During fiscal 1996, the Company incurred $2.2 million for
the relocation costs of moving equipment and personnel.
In the fourth quarter of fiscal 1996, the Company recorded $2.0 million in
estimated legal fees expected to be incurred in connection with a securities
class action complaint filed in March 1996 and other legal expenses (See
Note 11).
In connection with the acquisitions of Central Point and SLR (See Note 2),
Symantec recorded total acquisition charges of $9.5 million in fiscal 1995. The
charges included $3.2 million for legal, accounting and financial advisory
services, $1.0 million for the write-off of duplicative product-related expenses
and modification of certain development contracts, $0.9 million for the
elimination of duplicative and excess facilities, $3.1 million for personnel
severance and outplacement expenses and $1.3 million for the consolidation and
discontinuance of certain operational activities and other acquisition related
expenses. During fiscal 1996, the Company recognized a
56
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
reduction in accrued acquisition, restructuring and other expenses of $2.3
million as actual costs incurred were less than costs previously accrued by the
Company.
In connection with the acquisitions of Fifth Generation and Contact by Symantec
and the acquisition of XTree by Central Point (See Note 2), the Company recorded
total charges of $25.9 million in fiscal 1994. The charges included $4.3
million for legal, accounting and financial advisory services, $7.6 million for
the write-off of duplicative product related expenses and modification of
certain development contracts, $3.6 million for the elimination of duplicative
and excess facilities, $5.3 million for personnel severance and outplacement
expenses and $5.1 million for the consolidation and discontinuance of certain
operational activities and other acquisition related expenses.
During fiscal 1994, Symantec implemented a plan to consolidate and centralize
certain operational activities. This plan was designed to reduce operating
expenses and enhance operational efficiencies by centralizing certain order
administration, technical support and customer service activities in Eugene,
Oregon. The Company recorded a charge of $4.7 million, which included $1.1
million for the elimination of duplicative and excess facilities, $1.5 million
for the relocation of the Company's existing operations and equipment, $1.1
million for employee relocation expenses and $1.0 million for employee severance
payments. This centralization has been completed.
During fiscal 1994, Central Point incurred $16.0 million of expenses related to
the restructuring of its operations in order to reduce its overall cost
structure and to redirect its software development and marketing efforts away
from the personal desktop computer market toward personal computer network
markets. The charge included $6.2 million for employee severance, outplacement
and relocation expenses, $5.6 million for the write-off of certain excess fixed
and intangible assets, $1.8 million for lease abandonments and facility
relocation and $2.4 million for the consolidation and discontinuance of certain
operational activities and other related expenses. Of the total charges, $5.9
million resulted from the write-off of assets and $10.1 million involved cash
outflows. This restructuring has been completed.
As of March 31, 1996, total accrued cash related acquisition and restructuring
expenses were $7.8 million and included $2.0 million for estimated legal fees
and expenses, $3.5 million for the elimination of duplicative and excess
facilities and $2.3 million for the consolidation and discontinuance of certain
operational activities and other acquisition related expenses.
During fiscal 1994, Central Point purchased from unrelated parties certain in-
process software technologies for approximately $3.0 million which was
immediately expensed.
During fiscal 1994, Symantec reached an agreement with the plaintiffs and
Symantec's insurance carriers to settle two securities class action lawsuits and
a related derivative lawsuit brought by stockholders of Symantec. The combined
settlement amount of the cases was $19.0 million, approximately $12.5 million of
which was paid by Symantec's insurance carriers. Symantec recorded a charge of
$6.5 million representing Symantec's portion of the class action settlement.
NOTE 11. LITIGATION
On March 18, 1996, a class action complaint was filed by the law firm of Milberg
Weiss Bershad Hynes & Lerach in Superior Court of the State of California,
County of Santa Clara against the Company and several of its current and former
officers and directors. The complaint alleges that Symantec insiders inflated
the stock price and then sold stock based on inside information that sales were
not going to meet analysts' expectations. The complaint seeks damages in an
unspecified amount. Symantec believes the complaint has no merit and will
vigorously defend itself. The Company has accrued certain estimated legal fees
and expenses related to this matter; however, actual amounts may differ
materially from those estimated amounts.
On December 30, 1994, Software Engineering Carmel ("Carmel") filed a lawsuit in
the U.S. District Court for the District of Oregon against Central Point, a
wholly owned subsidiary of the Company. Carmel developed and maintains the
anti-virus program distributed by Central Point. The complaint alleges that
Central Point breached its contract with Carmel by not fulfilling an implied
obligation under the contract to use its best efforts or alternatively, its
reasonable efforts, to market the anti-virus program developed by Carmel. The
complaint also alleges that Central Point violated the non-competition provision
in its agreement by selling a competing anti-virus program,
57
<PAGE>
apparently based on Symantec's sale of its own anti-virus product. The
complaint seeks damages in the amount of $6.75 million and a release of Carmel
from its obligation not to sell competing products. A trial date has been set
for July 1996. Symantec believes the complaint has no merit.
On September 3, 1992, Borland International, Inc. ("Borland") filed a lawsuit in
the Superior Court for Santa Cruz County, California against Symantec, Gordon E.
Eubanks, Jr. (Symantec's President and Chief Executive Officer) and Eugene Wang
(a former Executive Vice President of Symantec who is a former employee of
Borland). The complaint, as amended, alleges misappropriation of trade secrets,
unfair competition, including breach of contract, interference with prospective
economic advantage and unjust enrichment. Borland alleged that prior to joining
Symantec, Mr. Wang transmitted to Mr. Eubanks confidential information
concerning Borland's product and marketing plans. Borland claims damages in an
unspecified amount. Symantec has denied the allegations of Borland's complaint
and contends that Borland has suffered no damages from the alleged actions.
Borland obtained a temporary restraining order and a preliminary injunction
prohibiting the defendants from using, disseminating or destroying any Borland
proprietary information or trade secrets. Symantec filed a cross complaint
against Borland alleging that Borland had committed abuse of process and
defamation in publishing statements that Symantec had acted in contempt of a
temporary restraining order. The case is not being actively prosecuted at this
time pending the outcome of the criminal proceedings, discussed below. Symantec
believes that Borland's claims have no merit.
On September 2, 1992, the Scotts Valley, California police department, operating
with search warrants for Borland proprietary and trade secret information,
searched Symantec's offices and the homes of Messrs. Eubanks and Wang and
removed documents and other materials. On February 26, 1993, criminal
indictments were filed against Messrs. Eubanks and Wang for allegedly violating
various California Penal Code Sections relating to the misappropriation of trade
secrets and unauthorized access to a computer system. On August 23, 1993, the
Court recused the District Attorney's Office from prosecution of the action. On
October 5, 1993, the State Attorney General and the District Attorney's Office
filed a Notice of Appeal of the Order, and that appeal was argued on July 11,
1995. On September 8, 1995, the Court of Appeals reversed the recusal order. A
petition for review of this decision by the California Supreme Court was granted
on December 14, 1995. Symantec believes the criminal charges against Messrs.
Eubanks and Wang have no merit.
On June 11, 1992, Dynamic Microprocessor Associates, Inc. ("DMA"), a former
wholly-owned subsidiary of Symantec which has since been merged into Symantec,
commenced an action against EKD Computer Sales & Supplies Corporation ("EKD"), a
former licensee of DMA and Thomas Green, a principal of EKD, for copyright
infringement, violations of the Lanham Act, trademark infringement,
misappropriation, deceptive acts and practices, unfair competition and breach of
contract. On July 14, 1992, the Suffolk County, New York sheriff's department
conducted a search of EKD's premises and seized and impounded thousands of
infringing articles. On July 21, 1992, the Court issued a preliminary
injunction against EKD and Mr. Green, enjoining them from manufacturing,
marketing, distributing, copying or purporting to license DMA's pcANYWHERE III
or using DMA's marks.
On July 20, 1992 and in a subsequent amendment, EKD and Mr. Green answered
Symantec's complaint denying all liability and asserting counterclaims against
Symantec and Lee Rautenberg, a former principal of DMA. In May 1993, EKD and
Mr. Green were granted permission to file a Second Amended Answer and
Counterclaims that dropped every previously raised claim and instead alleged
that DMA obtained the temporary restraining order and preliminary injunction in
bad faith and that DMA, Symantec and Mr. Rautenberg breached certain license
agreements and violated certain federal and New York State antitrust laws. In
February 1995, DMA was granted leave to file an Amended Complaint, which EKD
subsequently responded to by a Third Amended Answer and Counterclaims virtually
identical to EKD's Second Amended pleading. Symantec believes the charges made
by EKD and Mr. Green have no merit.
Symantec is involved in a number of other judicial and administrative
proceedings incidental to its business. The Company intends to defend all of
the aforementioned pending lawsuits vigorously and although adverse decisions
(or settlements) may occur in one or more of the cases, the final resolution of
these lawsuits, individually or in the aggregate, is not expected to have a
material adverse effect on the financial position of the Company. However,
depending on the amount and timing of an unfavorable resolution of these
lawsuits, it is possible that the Company's future results of operations or cash
flows could be materially adversely affected in a particular period.
58
<PAGE>
NOTE 12. SEGMENT INFORMATION
Symantec operates in the microcomputer software industry business segment. The
Company markets its products in North America and international countries
primarily through retail and distribution channels.
INFORMATION BY GEOGRAPHIC AREA
<TABLE>
<CAPTION>
Year Ended March 31,
----------------------------------------
(In thousands) 1996 1995 1994
- --------------------------------------- --------- ---------- ----------
NET REVENUES:
<S> <C> <C> <C>
North American operations:
North American customers $ 303,280 $ 296,684 $ 286,790
International customers 16,609 16,977 33,504
Intercompany 6,015 4,625 7,841
---------- --------- ---------
325,904 318,286 328,135
International operations:
Customers 125,543 117,607 82,912
Intercompany 11,387 13,865 2,855
---------- --------- ---------
136,930 131,472 85,767
Eliminations (17,402) (18,490) (10,696)
---------- --------- ---------
$ 445,432 $ 431,268 $ 403,206
---------- --------- ---------
---------- --------- ---------
OPERATING INCOME (LOSS):
North American operations $ (58,296) $ 17,907 $ (57,458)
International operations 8,201 23,449 10,473
Eliminations 1,816 (1,070) (305)
---------- --------- ---------
$ (48,279) $ 40,286 $ (47,290)
---------- --------- ---------
---------- --------- ---------
March 31,
----------------------------------------
(In thousands) 1996 1995 1994
- --------------------------------------- --------- ---------- ----------
IDENTIFIABLE ASSETS:
North American operations $ 246,619 $ 258,850 $ 227,672
International operations 51,309 50,782 38,696
---------- --------- ---------
$ 297,928 $ 309,632 $ 266,368
---------- --------- ---------
---------- --------- ---------
</TABLE>
Intercompany sales between geographic areas are accounted for at prices
representative of unaffiliated party transactions.
SIGNIFICANT CUSTOMERS
The following customers accounted for more than 10% of net revenues during
fiscal 1996, 1995 and 1994:
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------
1996 1995 1994
----- ----- ----
<S> <C> <C> <C>
Ingram Micro D 27% 22% 18%
Merisel 10 11 13
</TABLE>
59
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SYMANTEC CORPORATION
(Registrant)
By /s/ Gordon E. Eubanks, Jr.
------------------------------
(Gordon E. Eubanks, Jr.,
President and Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated below.
Signature Title Date
- ------------------------------ -------------------------- --------------
CHIEF EXECUTIVE OFFICER:
/s/ Gordon E. Eubanks, Jr. President, Chief Executive June 24, 1996
- ------------------------------ Officer and Director
(Gordon E. Eubanks, Jr.)
CHIEF FINANCIAL OFFICER:
/s/ Robert R. B. Dykes Executive Vice President/ June 24, 1996
- ------------------------------ Worldwide Operations and
(Robert R. B. Dykes) Chief Financial Officer
CHIEF ACCOUNTING OFFICER:
/s/ Howard A. Bain III Vice President Finance and June 24, 1996
- ------------------------------ Chief Accounting Officer
(Howard A. Bain III)
DIRECTORS:
/s/ Charles M. Boesenberg Director June 24, 1996
- ------------------------------
(Charles M. Boesenberg)
/s/ Walter W. Bregman Director June 24, 1996
- ------------------------------
(Walter W. Bregman)
Chairman of the Board June __, 1996
- ------------------------------
(Carl D. Carman)
/s/ Robert S. Miller Director June 24, 1996
- ------------------------------
(Robert S. Miller)
- ------------------------------ Director June __, 1996
(Leslie L. Vadasz)
60
<PAGE>
SCHEDULE II
SYMANTEC CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning Costs and End
Classification of Period Expenses Deductions of Period
- ----------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C>
Allowance for doubtful accounts:
Year ended March 31, 1994 $ 4,368 $ 2,013 $ (1,567) $ 4,814
Year ended March 31, 1995 4,814 1,094 (1,056) 4,852
Year ended March 31, 1996 4,852 903 (739) 5,016
</TABLE>
61
<PAGE>
EXHIBIT 10.35
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
ALAN SCHULMAN (128661)
BLAKE M. HARPER (115756)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619\231-1058
KAPLAN, KILSHEIMER & FOX, LLP
ROBERT N. KAPLAN
685 Third Avenue, 26th Floor
New York, NY 10017
Telephone: 212/687-1980
Attorneys for Plaintiffs
SUPERIOR COURT OF STATE OF CALIFORNIA
COUNTY OF SANTA CLARA
STEVEN COOPERMAN and ERIC D. FREED ) No. CV756665
IRA, On Behalf of Themselves and )
All Others Similarly Situated, ) CLASS ACTION
)
Plaintiffs, ) COMPLAINT FOR DAMAGES BASED
) UPON:
vs. )
) (1) VIOLATION OF CAL.
GORDON EUBANKS, CHARLES BOESENBERG, ) CORP. CODE Sections 25400 AND
EUGENE WANG, HOWARD BAIN, ELLEN ) 25500; AND
TAYLOR, ROBERT DYKES, JOHN LAING, ) (2) VIOLATION OF CAL. CIV.
DEREK WITTE and SYMANTEC ) CODE Sections 1709-1710
CORPORATION, )
)
Defendants. ) Plaintiffs Demand A
) Trial By Jury
- --------------------------------------- -------------------
<PAGE>
SUMMARY OF ACTION
1. This is a class action on behalf of purchasers of the stock of
Symantec Corporation ("Symantec" or the "Company") between July 24, 1995 and
January 8, 1996 (the "Class Period"), complaining of a fraudulent scheme,
conspiracy and course of business that operated as a fraud or deceit on
purchasers of Symantec stock due to defendants' false and misleading statements,
primarily about Symantec's new Windows 95-related utility software products
known as Norton Navigator, Norton AntiVirus and Norton Utilities, and Symantec's
sales in Europe, accompanied by falsification of Symantec's first and second
quarters fiscal 1996 (ended June 30 and September 29, 1995) financial
statements. These false and misleading statements drove Symantec's stock to a
Class Period high of $33-1/4 and enabled (i) Symantec to complete a large
acquisition of another software company, Delrina Inc. ("Delrina"), in November
1995 by agreeing to issue, I.E., sell, 15 million shares of its stock; and (ii)
Symantec's insiders to sell 394,901 shares of their shares at artificially
inflated prices as high as $32, pocketing over $12 million for themselves,
before it was exposed that sales of Symantec's Windows 95 utility software
products were very poor and that, due to huge product returns, Symantec would
suffer flat revenue growth in its third quarter of fiscal 1996 (ended December
31, 1995), resulting in a loss, causing its stock to collapse from $22-1/2 to
$10-1/8 per share, in just four trading days, on huge volume of 27 million
shares -- over 67% of Symantec's public float.
2. During 1993 and 1994, Symantec's business performed erratically,
primarily because Symantec had been unable to achieve substantial or consistent
revenue growth by introducing new
- 1 -
<PAGE>
products or growing its business. As a result, Symantec stock performed poorly
and, despite an increase during 1994, at year end 1994 Symantec's stock was
trading below its price at the beginning of 1993, 24 months earlier, thus
trailing well behind the strong performances of many other successful software
companies during that same time period. This poor stock performance put
pressure on Symantec's management to make it appear that Symantec's earnings and
business were growing, so that the stock would perform better.
3. During early 1995, it was widely known that Microsoft intended to
introduce a new, upgraded version of its Windows computer operating system known
as Windows 95. The upcoming release of Windows 95 was widely anticipated in the
financial community and viewed as providing an opportunity for software
companies like Symantec, which sold products related to Microsoft's Windows,
to profit as a result of this new "upgrade cycle." As a result, investor
interest in companies like Symantec increased. During the past several
years, Symantec had also attempted to grow its business by acquiring other
companies, using its own stock to make such acquisitions. Thus, in early
1995, Symantec's President and CEO, Gordon Eubanks ("Eubanks") and Symantec's
other insiders realized that they had a significant opportunity to push
Symantec's stock price much higher by capitalizing on investor interest in
Windows 95 and then take advantage of that high stock price by making a major
acquisition for Symantec by issuing Symantec stock and by selling substantial
amounts of their own Symantec shares into the market at high, and for them,
very profitable prices.
4. In the spring of 1995, Symantec announced it would launch several new
products concurrently with the introduction of Windows
- 2 -
<PAGE>
95, and previewed those products -- the Norton Navigator, AntiVirus and
Utilities in April 1995. As a result of anticipation over the possible success
of these new products, as well as the apparent success of the sale of Symantec's
enterprise products and strong sales in Europe, Symantec's stock price increased
from around $17 per share at the beginning of 1995 to as high as $30 per share
by late June 1995.
5. Capitalizing on this increase in Symantec's stock price, in early July
1995, Symantec announced that it would acquire Delrina, another software
company, in a transaction that would enable Delrina's shareholders to exchange
their Delrina shares for 15 million shares of Symantec stock, IN ONE OF THE
LARGEST, IF NOT THE LARGEST, ACQUISITIONS SYMANTEC HAD EVER MADE. However,
because Delrina was located in Canada and because of other pre-merger work that
had to be completed before the merger could be consummated, the Delrina
acquisition would not be voted upon by Delrina's shareholders until November
1995. Since the value of the transaction to Delrina's shareholders depended
upon the price of Symantec's stock, Symantec's insiders were under pressure
to keep Symantec's stock price high until after Delrina's shareholders
voted on the acquisition to increase the likelihood of approval by Delrina's
shareholders.
6. In late July, Symantec officially introduced its three new Windows 95
utility software products, the Norton Navigator, AntiVirus and Utilities.
However, by late July, Symantec's insiders had learned that Windows 95 when
released would contain a much larger amount of built-in utilities than earlier
versions of Windows had contained and, as a result, the prospects for commer-
- 3 -
<PAGE>
cial success of its own line of Windows 95 utility products was greatly
diminished. And, in order to get distributors and resellers to accept shipments
of large amounts of its Norton Utilities for Windows 95, Symantec was forced to
agree to give those distributors and resellers unlimited rights of return on any
of the product that did not "sell through" at retail. Nevertheless, on July
24, 1995 -- the commencement of the Class Period -- when Symantec reported its
results for the first quarter of fiscal 1996 (ended June 30, 1995), it assured
the market that the results were at the "HIGH-END" of Symantec's expectations,
that the good results were largely due to "STRONG OVERSEAS [MOSTLY EUROPEAN]
SALES," that Symantec expected to be a "MAJOR BENEFICIARY" of the Windows 95
upgrade cycle and thus its next few quarters would be particularly strong,
enabling it to achieve fiscal 1996 earnings per share of $1.20-1.23 per share.
7. In September 1995, after Windows 95 was introduced in August 1995,
Symantec told the market that the sales of its Windows 95 utility products were
"MEETING THE COMPANY'S EXPECTATIONS" and that the Company was "REAL HAPPY WITH
HOW THEY'RE SELLING." Later in September and during October 1995, Symantec
assured the market that sales of its Windows 95 lead products were "STRONG" and
were "MEETING or "BEATING EXPECTATIONS." When Symantec reported strong revenue
and earnings per share growth for its second quarter of fiscal 1996 (ended
September 29, 1995), it again told analysts that the results "EXCEEDED
SYMANTEC'S EXPECTATIONS" due to "STRONG SALES" of its Windows 95 utility
products. Symantec also assured analysts that it was utilizing a "CONSERVATIVE"
approach to revenue recognition for Windows 95 products and that as a result of
this
- 4 -
<PAGE>
would report stronger earnings growth later that year. Later in 1995,
Symantec's top executives told analysts that its business was continuing to do
"VERY WELL" with sales of its Windows 95 utility products continuing to be
"STRONG" and "MEETING OR EXCEEDING ITS EXPECTATIONS," resulting in Symantec
"guiding" analysts to increase their forecasted fiscal 1996 earnings per share
for Symantec to approximately $1.35 per share.
8. These positive reports pushed Symantec stock to a Class Period high of
$33-1/4 per share and maintained the stock price at inflated levels throughout
the Class Period, enabling several key insiders at Symantec to unload an
aggregate of 394,901 shares of their Symantec stock at between $29-32 per share
during August and September 1995, allowing them to pocket over $12 million,
while helping to assure that Delrina's shareholders voted to approve the
acquisition of their company by Symantec in November 1995. OF THE EIGHT
SYMANTEC INSIDERS WHO UNLOADED SHARES AT THESE INFLATED PRICES, SEVEN SOLD OVER
50% OF THE STOCK THEY OWNED, FIVE SOLD VIRTUALLY ALL THEIR HOLDINGS, I.E., OVER
90%, WHILE EUBANKS, SYMANTEC'S CEO, SOLD OVER 50% OF HIS HOLDINGS! Virtually
all of the shares sold by Symantec's insiders were obtained by them by the
exercise of stock options at much lower prices -- SOME AS LOW AS $.50 PER SHARE
- -- and then immediately sold by them to pocket millions in risk-free profits
based on Symantec stock's inflated trading price.
9. On January 4, 5 and 8, 1996, Symantec stock plunged from $22-1/2 to
$15-3/8 per share, a 32% decline on 11 million shares volume, as information
leaked into the marketplace that the sales of Symantec's Windows 95 utility
products might not be as strong as
- 5 -
<PAGE>
earlier represented. Then, after the close of trading on January 8, 1996,
Symantec shocked the market by revealing that its results for the quarter ended
December 31, 1995 would be much worse than earlier forecast due to very poor
sales of -- and large returns of -- its Windows 95 utility products -- meaning
Symantec would achieve NO REVENUE GROWTH OVER THE PRIOR QUARTER AND LIKELY
SUFFER A LOSS FOR THAT QUARTER. The next trading day, Symantec's stock
collapsed to $10-1/8 per share, a 34% one-day decline on huge volume of 15.9
million shares -- THE LARGEST ONE-DAY PERCENTAGE STOCK PRICE DECLINE ON THE
LARGEST ONE-DAY STOCK VOLUME IN SYMANTEC'S HISTORY. Eubanks admitted "WE HAD
A TERRIBLE QUARTER. WE SCREWED UP." Analysts immediately slashed their
earnings forecasts for Symantec for the fourth quarter of fiscal 1996, fiscal
1996 as a whole and for fiscal 1997. Later, Symantec announced that its
revenues for the December 1995 quarter were $111 million (a decline from the
third quarter) and that it actually suffered an operating loss of $1.1
million! Later, Eubanks admitted this catastrophe was not due to slower than
anticipated sales of Windows 95 --"I'm not blaming Microsoft. I'm blaming
Symantec. . . . Windows 95 is selling great. It's just that we had a higher
forecast for sales of our products than we managed to meet."
10. Each of the positive statements about Symantec's business during the
Class Period was materially false and misleading. The true facts were:
(a) Symantec's Windows 95 utility software products (Navigator,
AntiVirus and Utilities) were selling poorly at retail and below the levels
forecast by the Company, which would result in
- 6 -
<PAGE>
large distributor/reseller returns of those products well in excess of amounts
Symantec had reserved for OR in sharply diminished distributor/reseller reorders
of those products, causing Symantec to not achieve the revenue and income growth
forecast by and for it for the last half of fiscal 1996;
(b) Sales of Symantec's Windows 95 Utilities, Navigator and AntiVirus
products were not meeting or exceeding Symantec's expectations and in fact were
below expectations, due to (i) lower than anticipated sales or Windows 95; AND
(ii) lower than anticipated "attach rates" of Symantec utility products to
Windows 95, as Windows 95 came equipped with a large number of built-in
utilities, thus diminishing the need for and attractiveness of Symantec's
products;
(c) Symantec was not encountering a good "attach rate" with respect
to the sale of its products along with Windows 95 and in fact the "attach rate"
was below expectations because Windows 95 came equipped with a large amount of
built-in utilities, thus making Symantec's products less necessary or attractive
to purchasers of Windows 95;
(d) Sales of Symantec's Windows 95 utility software products were not
strong and were not beating or exceeding its expectations, and in fact, sales of
such products at the retail level were weak and well below Symantec's
expectations, meaning that Symantec's reserves for product returns by
distributors and resellers were grossly inadequate;
(e) Sales of Symantec's enterprise products were weak and below
internal goals and budgets;
- 7 -
<PAGE>
(f) Symantec's European sales were well below Symantec's expectations
and doing very poorly due to competitive pressures and localized negative
economic factors;
(g) That the problems identified in Paragraph 10(a)-(f) above, were
causing Symantec to fall short of its planned revenue and earnings growth and
made it impossible for Symantec to meet the revenue and earnings forecasts made
by and for it for the third and fourth quarters of fiscal 1996 and fiscal 1996
as a whole;
(h) Symantec was not following a conservative approach with respect
to revenue recognition on its Windows 95 utility and products and in fact was
improperly recognizing revenue on these products in violation of Generally
Accepted Accounting Principles ("GAAP"), thus inflating its financial results
and concealing the poor sales or "attach rates" of these products and the
deterioration of Symantec's business overall;
(i) Symantec's reported revenues and earnings per share for the first
and second quarters of fiscal 1996 (ended June 30 and September 29, 1995) were
artificially inflated due to the improper recognition of revenue via the
accounting artifices and tricks detailed in this Complaint;
(j) Symantec's method of accounting for its Windows 95 utility
products was not "conservative" or such that it would result in strengthening
Symantec's reported profits in the last half of fiscal 1996, but, in fact, the
contrary was true, since Symantec was violating GAAP in the manner in which it
was recognizing revenue in Europe and on the sale of its Windows 95 utility
products, which would result in massive returns and/or
- 8 -
<PAGE>
reduced shipments of those products later on in fiscal 1996, hurting Symantec's
reported profits;
(k) That in order to cover up the weak sales of its Windows 95-
related products, its enterprise products and its poor European results,
Symantec was falsifying its reported financial results by improperly recognizing
millions in revenue, thus inflating its reported revenues, income and earnings
per share;
(l) It was not true that except for Microsoft no software company
stood to gain as much from the sale of Microsoft Windows 95 operating systems as
Symantec did as defendants knew that Windows 95 came equipped with large amounts
of built-in utilities and this diminished the desirability of or necessity for
Symantec's products among purchasers of Windows 95 and this, in fact, was very
adversely affecting retail sales of Symantec's Windows 95 utility products;
(m) Because defendants knew that Windows 95 would come equipped with
a large amount of built-in utilities which would greatly diminish the need for
and appeal of Symantec's stand-alone Windows 95 utility software products,
Symantec's statement that it would be a major beneficiary from the Windows 95
upgrade cycle was known by defendants to be false;
(n) That defendants' positive forecasts and projections regarding
Symantec's Windows 95 utility product line, and its revenues or earnings growth
during the balance of fiscal 1996 were known by defendants to be false as they
were inconsistent with the above negative factors; and
(o) That defendants' forecasts of increased earnings for Symantec in
fiscal 1996 of $1.25-$1.35 and of earnings per share of
- 9 -
<PAGE>
$.31 - $.33 for the third quarter of fiscal 1996, were known by defendants to be
false as they were contradicted by the adverse facts set forth above.
11. The charts below show the increase in Symantec's stock price while
defendants were issuing false and misleading statements, defendants' stock sales
at inflated prices and Symantec stock's collapse as the true facts became known,
and illustrate that, when compared to an index of similar stocks, the movement
of Symantec stock was largely due to Company specific information as opposed to
industry or market factors.
SYMANTEC CORPORATION
DECEMBER 30, 1994 - JANUARY 30, 1996
DAILY STOCK PRICES
[GRAPH]
- 10 -
<PAGE>
SYMANTEC CORPORATION
VS. H&Q COMPUTER SOFTWARE PRODUCTS GROUP
JUNE 1, 1995 - JANUARY 24, 1996
[GRAPH]
JURISDICTION AND VENUE
12. This Court has jurisdiction over all causes of action asserted in this
Complaint pursuant to the California Constitution, Article VI, Section 10,
because this case is a cause not given by statute to other trial courts. The
claims asserted herein arise under Sections 25400 and 25500 of the Cal. Corp.
Code and Sections 1709-1710 of the Cal. Civ. Code.
13. Each of the individual defendants resides in and is a citizen of the
State of California. One of the plaintiffs lives in
- 11 -
<PAGE>
and is a citizen of California. Symantec has its principal place of business in
California. The amount in controversy of each of the named plaintiffs' claims is
less than $50,000 exclusive of interest and costs. This action is not removable
to federal court.
CLASS ACTION ALLEGATIONS
14. Plaintiffs bring this action as a class action pursuant to California
Code of Civil Procedure Section 382 on behalf of all persons who purchased or
otherwise acquired Symantec stock (the "Class") during the Class Period.
Excluded from the Class are the defendants, members of their families and any
entity in which a defendant has an interest.
15. The Class is composed of numerous residents of California, as well as
persons dispersed throughout the U.S., the joinder of whom is impracticable. The
disposition of their claims in a class action will provide substantial benefits
to the parties and the Court. During the Class Period, Symantec had more than 38
million shares of stock outstanding, owned by thousands of shareholders.
16. There is a well-defined community of interest in the questions of law
and fact involved in this case. The questions of law and fact common to the
members of the Class which predominated over questions which may affect
individual Class members, include the following:
(a) Whether Cal. Corp. Code Sections 25400 and 25500 were violated by
defendants;
(b) Whether Cal. Civ. Code Sections 1709-1710 were violated by
defendants;
- 12 -
<PAGE>
(c) Whether defendants omitted and/or misrepresented material facts;
(d) Whether defendants failed to disclose or conspired or aided and
abetted one another in not disclosing material facts necessary to make the
statements made not misleading;
(e) Whether defendants knew or recklessly disregarded that their
statements were false and misleading;
(f) Whether the price of Symantec stock was artificially inflated
during the Class Period; and
(g) The extent of damage sustained by Class members and the
appropriate measure of damages.
17. Plaintiffs' claims are typical of those of the Class because
plaintiffs and the Class sustained damages from defendants' wrongful conduct.
18. The prosecution of separate actions by individual Class members would
create a risk of inconsistent and varying adjudications.
19. Plaintiffs will adequately protect the interests of the Class. They
have retained counsel who are experienced in class action securities litigation.
Plaintiffs have no interests which conflict with those of the Class.
20. A class action is superior to other available methods for the fair and
efficient adjudication of this controversy.
THE PARTIES
21. (a) Plaintiff Steven Cooperman, a retired physician, purchased 2,000
shares of Symantec stock on December 1, 1995 at $26-3/4 per share and was
damaged thereby.
- 13 -
<PAGE>
(b) Plaintiff Eric D. Freed IRA purchased 100 shares of Symantec
stock on October 30, 1995 at $25-5/8 per share and was damaged thereby.
22. (a) Defendant Symantec is headquartered at Cupertino, California. It
sells computer software products. Approximately 88% of Symantec's revenues are
derived from products that operate on Microsoft's MS-DOS or Windows operating
systems. Symantec stock trades in an efficient market on the NASDAQ System.
(b) Symantec has had a historic pattern of acquiring other companies
by issuing Symantec stock. During 1992-1994, Symantec acquired the following
companies by issuing shares of Symantec stock:
<TABLE>
<CAPTION>
SHARES OF
SYMANTEC
COMPANIES DATE COMMON STOCK
ACQUIRED ACQUIRED ISSUED
- --------------------------------------------------------------------------
<S> <C> <C>
INTEC SYSTEMS CORPORATION AUGUST 31, 1994 133,332
CENTRAL POINT SOFTWARE, INC. JUNE 1, 1994 4,029,429
SLR SYSTEMS, INC. MAY 31, 1994 178,093
FIFTH GENERATION SYSTEMS, INC. OCTOBER 4, 1993 2,769,010
CONTACT SOFTWARE INTERNATIONAL INC. JUNE 2,1993 2,484,019
CERTUS INTERNATIONAL CORPORATION NOVEMBER 30,1992 368,141
MULTISCOPE, INC. SEPTEMBER 2, 1992 253,878
THE WHITE WATER GROUP, INC. SEPTEMBER 2, 1992 69,740
</TABLE>
One of the reasons why Symantec's insiders wanted to push Symantec's stock price
higher in 1995 and were willing to falsify its first and second quarter fiscal
1996 results (ended June 30 and September 29, 1995), was so that Symantec could
make a major acquisition using Symantec stock.
(c) Symantec, Eubanks and Symantec's other insiders have a history of
fraudulent conduct in connection with the trading in Symantec stock. In 1991-
1992, when they pushed Symantec's stock
- 14 -
<PAGE>
from the high $20s to over $50 per share while reporting strong (but phony)
financial results while falsely forecasting strong, continued profit growth, due
to the success of Symantec's products, Eubanks, Robert Dykes, John Laing and
other Symantec insiders unloaded 2.5 million of their Symantec shares for $90
million, before it was exposed that Symantec was stealing trade secrets from
Borland and Symantec reported losses rather than the strong profits it had
forecast. Eubanks and Eugene Wang were indicted for theft of those trade
secrets. Symantec stock collapsed to less than $10 per share. After being sued
by investors for that fraud, Symantec, Eubanks and the other defendants paid $19
million to compensate the investors they had allegedly defrauded. The chart
below highlights this prior incident of securities fraud involving Symantec and
its insiders:
[GRAPH]
- 15 -
<PAGE>
(d) (i) Another reason why Eubanks and the other officers of
Symantec named as defendants falsified Symantec's reported profits for the
quarters ended June 30 and September 29, 1995 was to collect larger payments
under Symantec's Executive Officer Compensation Plan, which pays quarterly
bonuses to Symantec's top executives EACH quarter based on Symantec's operating
profits and performance compared to the Company's internal budget or forecast.
During the past, Symantec's executive officers had their base salaries reduced
by 10% to reflect the Company's failure at that time to meet desired targets and
objectives. Thus, they had experienced the consequences of poor financial
performance and were determined to have Symantec report inflated profits even if
they had to falsify its result to do so;
(ii) Bonuses for executive officers are paid pursuant to
Symantec's quarterly bonus program. Under the quarterly bonus program, a bonus
pool is established by Symantec's Board each quarter. The pool for the quarterly
bonus program is increased by a percentage of operating income in excess of the
Company's plan for the quarter and is reduced if operating income falls below
the Company's plan. The Board determines the amount payable to the CEO, and the
CEO proposes to the Board for their approval the allocation of the remainder of
the pool to the remaining executive officers;
(iii) Under the quarterly bonus program, bonuses for executive
officers are determined based in part on overall corporate performance. These
factors receive approximately equal weight. Overall corporate performance is
judged based primarily on operating profit/loss, including ability to achieve
budgeted
- 16 -
<PAGE>
revenue and expense levels. Because the pool of funds available for bonuses is
determined by corporate financial performance, bonuses are significantly
affected if corporate financial performance falls short of budget or goals; and
(iv) An important factor taken into account by the Board in
awarding bonuses includes executives' ability to achieve budgeted revenue
levels. The Company establishes its financial objectives in connection with its
normal financial budgeting process. Approximately every six months, a budget is
established for the following four fiscal quarters.
23. (a) Defendant Gordon Eubanks is President and CEO of Symantec and a
member of its Board. Because of defendant Eubanks' position with Symantec, he
knew the adverse non-public information about its business, finances, products,
markets and present and future business prospects via access to internal
corporate documents (including Symantec's operating plans, budgets and forecasts
and reports of actual operations compared thereto), conversations and
connections with other corporate officers and employees, attendance at
management and Board of Directors' meetings and committees thereof and via
reports and other information provided to them in connection therewith. As part
of the scheme, Eubanks sold 135,000 shares of Symantec stock at artificially
inflated prices of $29-$30-7/8 per share based on inside information, pocketing
$4.1 million. Eubanks exercised options to acquire 105,000 of those shares at
$.50-1.00 per share and sold the shares immediately upon exercise. These sales
constituted 52% of Eubank's holdings in Symantec. Eubanks is currently under
criminal indictment for stealing trade secrets from one of Symantec's
competitors.
- 17 -
<PAGE>
(b) Defendant Robert Dykes ("Dykes") is Executive Vice President-
Worldwide Operations and Chief Financial Officer of Symantec. Because of
defendant Dykes' position with Symantec, he knew the adverse non-public
information about its business, finances, products, markets and present and
future business prospects via access to internal corporate documents
(including Symantec's operating plans, budgets and forecasts and reports
of actual operations compared thereto), conversations and connections
with other corporate officers and employees, attendance at management meetings
and via reports and other information provided to them in connection therewith.
Dykes signed the Form 10-Qs for the quarters ended June 30 and September 29,
1995. As part of the fraudulent scheme, Dykes sold 100,000 shares of Symantec
stock at artificially inflated prices of $30-5/8 per share based on inside
information, pocketing $3 million. Dykes exercised options to purchase 50,000 of
those shares at $12.75 per share and 50,000 shares at $16.94 per share and sold
the shares immediately upon exercise. These sales constituted 65% of Dykes'
holdings in Symantec.
(c) Defendant John Laing ("Laing") is Executive Vice President-
Worldwide Sales of Symantec. Because of Laing's position with Symantec, he knew
the adverse non-public information about its business, finances, products,
markets and present and future business prospects via access to internal
corporate documents (including Symantec's operation plans, budgets and forecasts
and reports of actual operations compared thereto), conversations and
connections with other corporate officers and employees, attendance at
management meetings and via reports and other information
- 18 -
<PAGE>
provided to them in connection therewith. As part of the fraudulent scheme,
Laing sold 11,500 shares of Symantec stock at artificially inflated prices of
$22.88 to $31 per share based on inside information, pocketing $355,600. Laing
exercised options to purchase 10,000 of those 11,500 shares at $11 per share and
sold the shares virtually immediately upon exercise. These sales constituted 43%
of Laing's holdings in Symantec.
(d) Defendant Charles Boesenberg ("Boesenberg") is an Executive Vice
President and a Director of the Company. Because of defendant Boesenberg's
position with Symantec, he knew the adverse non-public information about its
business, finances, products, markets and present and future business prospects
via access to internal corporate documents (including Symantec's operating
plans, budgets and forecasts and reports of actual operations compared thereto),
conversations and connection with other corporate officers and employees,
attendance at management and Board of Directors' meetings and committees thereof
and via reports and other information provided to them in connection therewith.
During the Class Period and as part of the fraudulent scheme, defendant
Boesenberg sold 75,332 shares of Symantec stock at artificially inflated prices
of $30-$31-1/8 per share based on inside information, pocketing over $2.2
million. Boesenberg exercised options to purchase those 75,332 shares at $10.75
and $16.16 per share and sold the shares immediately upon exercise. These sales
constituted 96% of Boesenberg's holdings in Symantec.
(e) Defendant Eugene Wang ("Wang") is an Executive Vice President of
Symantec. Because of Wang's position with Symantec, he knew the adverse non-
public information about its business,
- 19 -
<PAGE>
finances, products, markets and present and future business prospects via access
to internal corporate documents (including Symantec's operating plans, budgets
and forecasts and reports of actual operations compared thereto), conversations
and connections with other corporate officers and employees, attendance at
management meetings thereof and via reports and other information provided in
connection therewith. As part of the fraudulent scheme, Wang sold 5,000 shares
of Symantec stock at artificially inflated prices of $31-5/8 per shares based
on inside information, pocketing $158,150. Wang exercised options to purchase
all 5,000 of those shares at $10.50 per share and sold the shares immediately
upon exercise. These sales constituted 100% of Wang's holdings in Symantec.
Wang is currently under criminal indictment for stealing trade secrets from
one of Symantec's competitors.
(f) Defendant Ellen Taylor ("Taylor") is a Vice President and General
Manager of the Norton Group of Symantec. Because of defendant Taylor's position
with Symantec, she knew the adverse non-public information about its business,
finances, products, markets and present and future business prospects via access
to internal corporate documents (including Symantec's operating plans, budgets
and forecasts and reports of actual operations compared thereto), conversations
and connections with other corporate officers and employees, attendance at
management meetings and via reports and other information provided to her in
connection therewith. As part of the fraudulent scheme, Taylor sold 21,174
shares of Symantec stock at artificially inflated prices of $28-$29-1/2 per
share based on inside information, pocketing $607,478. Taylor exercised options
to purchase those
- 20 -
<PAGE>
21,174 shares at $11 and $16 per share and sold the shares immediately upon
exercise. These sales constituted 98% of Taylor's holdings in Symantec.
(g) Defendant Derek Witte ("Witte") is a Vice President and General
Counsel of Symantec. Because of Witte's position with Symantec, he knew the
adverse non-public information about its business, finances, products, markets
and present and future business prospects via access to internal corporate
documents (including Symantec's operating plans, budgets and forecasts and
reports of actual operations compared thereto), conversations and connections
with other corporate officers and employees, attendance at management meetings
and via reports and other information provided in connection therewith. As part
of the fraudulent scheme, defendant Witte sold 25,793 shares of Symantec stock
at artificially inflated prices of $31-$32 per share based on inside
information, pocketing $802,456. Witte exercised options to purchase 24,647 of
those shares at $10-1/4-$14-1/2 per share and sold the shares immediately upon
exercise. These sales constituted 100% of Witte's holdings in Symantec.
(h) Defendant Howard Bain ("Bain") is Chief Accounting Officer of
Symantec. Because of Bain's position with Symantec, he knew the adverse non-
public information about its business, finances, products, markets and present
and future business prospects via access to internal corporate documents
(including Symantec's operating plans, budgets and forecasts and reports of
actual operations compared thereto), conversations and connections with other
corporate officers and employees, attendance at management meetings and via
reports and other information provided in
- 21 -
<PAGE>
connection therewith. Bain signed the Company's Form 10-Qs for the quarters
ended June 30 and September 29, 1995. As part of the fraudulent scheme, Bain
sold 21,102 shares of Symantec stocks at artificially inflated prices of
$22-5/6-$31-3/4 per share based on inside information, pocketing $658,939. Bain
acquired 20,000 of those 21,102 shares by the exercise of options at $11 per
share and immediately sold the shares upon exercise. These sales constituted
98% of Bain's holdings in Symantec.
(i) The individuals named as defendants in Paragraph 23 (a) - (h) are
referred to as the "Individual Defendants." The Individual Defendants aided
or abetted or conspired to commit the violations of law complained of.
24. Defendant Eubanks, by reason of his position as CEO and President of
Symantec, and a director of the Company was a controlling person of Symantec and
had the power and influence, and exercised the same, to cause Symantec to engage
in the conduct complained of.
25. During the Class Period, each Individual Defendant occupied a
position that made him or her privy to non-public information concerning
Symantec. Because of this access, each of these defendants knew that the
adverse facts specified herein were being concealed. Notwithstanding their duty
to refrain from selling Symantec stock while in possession of material, non-
public information concerning Symantec, the defendants sold 394,901 shares of
the Company's stock, in many instances over 90% of their holdings, pocketing
over $12 million and thus profiting from their fraudulent scheme.
- 22 -
<PAGE>
SYMANTEC'S INTERNAL FORECASTS
PLANS AND PROJECTIONS
26. A key management tool for Symantec's top executives was Symantec's
annual budget or forecast, by which the Company's Board, after input from top
executives, set performance goals and then closely monitored the Company's
actual performance, compared to those budgeted and/or forecasted. Symantec
prepared its fiscal 1996 forecast and budget by mid-1995 and then updated it
thereafter. Symantec's fiscal 1996 budget or forecast for the year ended March
31, 1996, which called for substantial revenue growth, was very dependent upon
Symantec obtaining large increases of revenue due to sales of its Windows 95
utility product line, plus greatly increased European revenues. Each of the
Individual Defendants was aware of Symantec's fiscal 1996 forecast and budget
and of internal reports comparing Symantec's actual results to those budgeted
and/or forecasted. Based on the negative internal reports of the Company's
actual performance compared to that budgeted and forecasted, the Individual
Defendants each knew Symantec's business was not performing as well as publicly
represented, that Symantec was encountering very poor retail sales of its
Windows 95 utility products due to low "attach rates," weak sales of its
enterprise software products, weak sales of its products in Europe, and that
Symantec was artificially inflating its reported revenues and profits by
improper practices, I.E., accounting tricks, detailed elsewhere in this
Complaint, meaning that Symantec could not possibly achieve the revenue and
earnings per share growth in the second, third and fourth quarters of fiscal
1996 or fiscal 1996 as a whole forecast by and for it. Thus,
- 23 -
<PAGE>
defendants each knew or recklessly disregarded that the statements issued during
the Class Period were false and misleading when made.
DEFENDANTS' FRAUDULENT SCHEME,
CONSPIRACY AND COURSE OF BUSINESS
27. During 1993 and 1994 Symantec's business performed erratically,
primarily because Symantec had been unable to achieve either substantial or
consistent revenue growth by successfully introducing new products or otherwise
growing its business. As a result, Symantec stock performed poorly and, despite
an increase during 1994, at year end 1994 Symantec's stock was trading BELOW its
price at the beginning of 1993, 24 months earlier, thus trailing well behind the
strong performances of many other successful software companies during that same
time period. This poor stock performance put pressure on Symantec's management
to boost Symantec's earnings and to grow the business, so that the stock would
perform better.
28. During early 1995 it widely known that Microsoft intended to
introduce a new, upgraded version of its Windows computer operating systems
known as Windows 95. The upcoming release of Windows 95 was widely followed in
the financial community and was viewed as providing an opportunity for software
companies like Symantec, which sold products related to Microsoft's Windows, to
profit as a result of this new "upgrade cycle." As a result of this, investor
interest increased in companies like Symantec. During the past several years,
Symantec had also attempted to grow its business by acquiring other companies,
using its own stock to make such acquistions. Thus, in early 1995, Symantec's
insiders realized that they had a significant oppor-
- 24 -
<PAGE>
tunity to push Symantec's stock price much higher by capitalizing on investor
interest in Windows 95 and then take advantage of that high stock price by
making a major acquisition for Symantec and by selling substantial amounts of
their own Symantec shares into the market at high, and for them, very profitable
prices.
29. In the spring of 1995, Symantec announced it would launch several new
products concurrently with the introduction of Windows 95, and previewed those
products -- the Norton Navigator, Norton AntiVirus and Norton Utilities -- in
April 1995. As a result of anticipation over the possible success of these new
products, as well as the apparent success of the sale of Symantec's enterprise
products and strong sales in Europe, Symantec's stock price increased from
around $17 per share at the beginning of 1995 to as high as $30 per share by
late June 1995.
30. On July 6, 1995, Symantec announced it would acquire Delrina by
issuing some 15 million shares of Symantec stock. This was a huge acquisition
for Symantec, THE LARGEST IT HAD EVER MADE. Based on Symantec's July 6, 1995
stock price of $26 per share, the acquition had a value of about $390 million to
Delrina's shareholders. However, shortly after the Delrina merger was
announced, Symantec stock declined from a high of $27-1/8 the day after the
merger was announced to as low as $23 several days later. The ability of
Symantec to complete the Delrina acquisition depended in part on keeping its
stock price high, at least through the date Delrina's shareholders voted on the
merger. Symantec's insiders were concerned that any further signigicant decline
in Symantec's stock would jeopardize their ability to complete the Delrina
- 25 -
<PAGE>
acquisition and inhibit their ability to profit by selling their Symantec stock
into the market.
31. In late July, Symantec also officially introduced its three new
Windows 95 utility software products, the Norton Navigator, Utilities and
AntiVirus. However, by late July, Symantec's insiders had learned that Windows
95, when released, would contain a much larger number of built-in utilities than
earlier versions of Windows had contained and, as a result, the prospects for
commercial success of Symantec's own line of Windows 95 utility products was
greatly diminished. However, because Symantec had already invested millions in
the development of these products and had already "pre-announced" that it would
introduce and market these products, Symantec had no realistic option other than
to go forward with product "roll-out" and hope for the best -- even though it
and its insiders knew the prospects for real success were remote at best --
intending to inflate Symantec's stock price long enough for them to unload lots
of their stock at inflated prices and for Symantec to achieve the approval of
the Delrina acquisition by Delrina's shareholders. Thus, defendants pursued a
fraudulent scheme, conspiracy and course of business while aiding and abetting
one another, that operated as a fraud and deceit on purchasers of Symantec stock
by making the false and misleading statements set forth below.
FALSE AND MISLEADING STATEMENTS
DURING THE CLASS PERIOD
32. On July 24, 1995, Symantec issued a press release reporting revenues,
net income and earnings per share of $90.1 million, $11.6 million and $.29,
respectively, for its first
- 26 -
<PAGE>
quarter of fiscal 1996, ended June 30, 1995. The release also stated:
"SYMANTEC CONTINUES TO SEE GROWTH IN OUR ENTERPRISE
PRODUCTS. . ." said Gordon E. Eubanks, Jr., Symantec's
president and CEO. "In addition, with the expected shipment
of Windows 95, we see a TREMENDOUS OPPORTUNITY for Symantec. . . ."
PREPARATION FOR WINDOWS 95
Symantec spent much of the June quarter preparing
for Windows 95. Symantec expects to ship three Windows
95 utility products in August, just prior to the release
of Microsoft's Windows 95. These products are Norton
Utilities for Windows 95, Norton Navigator for Windows 95
and Norton AntiVirus for Windows 95.
33. On July 24, 1995, Eubanks and Bain spoke with securities analysts and
told them:
- Symantec's first quarter results were at the "HIGH
END OF SYMANTEC'S EXPECTATIONS."
- Symantec's strong results were largely due to
"STRONG OVERSEAS (MOSTLY EUROPEAN) SALES."
- Symantec's was poised to benefit from the August 1995
introduction of Windows 95 due to its Norton AntiVirus,
Norton Utilities and Norton Navigator products.
- Symantec's next two quarters were expected to be
"PARTICULARLY STRONG."
- Symantec expected to be a "MAJOR BENEFICIARY" of the
Windows 95 upgrade cycle.
- Symantec forecast or endorsed forecasts of fiscal
1996 earnings per share of $1.20-$1.23.
Securities analysts reported this information to the market where it became part
of the total mix of information affecting Symantec stock while increasing their
earnings forecasts for Symantec based on its stronger than expected first
quarter fiscal 1996 results and the positive statements made by its executives.
Symantec's stock surged to $27-7/8 after Symantec's July 24, 1995 report and its
executives' discussions with analysts.
- 27 -
<PAGE>
34. On July 31, 1995, Symantec issued a press release which stated:
Symantec Corporation today announced a comprehensive
set of three utility products of Microsoft Windows 95.
. . . The products are Norton Utilities, the only 32-bit
continuous system protection and data recovery solution
for Windows 95; Norton Navigator for enhanced file
management and desktop navigation; and Norton AntiVirus,
comprehensive 32-bit anti-virus protection specifically
for Windows 95.
* * *
Gordon E. Eubanks, Jr., president and CEO said,
". . . The products we are introducing for Windows 95
enhance our position as the industry's leader providing
reliable and technically-proven utility software."
35. On September 1, 1995, Eubanks gave an inverview to
REUTERS which REUTERS reported. Eubanks said:
- Sales of Symantec's utility products for Windows 95
"ARE MEETING THE COMPANY'S EXPECTATIONS."
- "WE'RE REAL HAPPY WITH HOW THEY'RE SELLING . . . .
IT'S CERTAINLY MEETING OUR EXPECTATIONS."
- Retailers were telling Symantec that there was a
"GOOD ATTACH RATE" of customers who buy Windows 95 and
"AT LEAST ONE OF SYMANTEC'S THREE NORTON UTILITY
PRODUCTS."
- Norton Navigator was "DOING A LITTLE BETTER THAN WE
THOUGHT," while Norton Utilities and Norton AntiVirus
were "MEETING EXPECTATIONS."
Immediately after this interview was reported, Symantec stock jumped almost $4
per share on its largest one-day stock volume in months. Within a few days the
stock reached its Class Period high of $33-1/4.
36. On September 20, 1995, Eubanks was interviewed by REUTERS. In that
interview Eubanks said:
- "Looking at Symantec's current sales performance
. . . EUROPEAN . . . markets WERE OUTPERFORMING OTHER
AREAS AT PRESENT."
- 28 -
<PAGE>
- Symantec was most excited about what it was seeing
in Europe for its business, where it was encountering
STRONG DEMAND for its products.
37. During August and September, while Symantec's stock was selling at
between $29 and $33-1/4 per share (its Class Period high), the eight Symantec
executives named as defendants sold 382,899 shares of Symantec stock, pocketing
over $12 million, and in at least five instances selling over 90% of the
Symantec stock they owned, with Eubanks the CEO selling 52% of his shares --
135,000 shares at $29-$30-7/8 per share -- 105,000 shares of which he acquired
by exercising options at $.50-$1.00 per share -- then immediately selling the
stock for over $30 per share.
38. On or about October 16, 1995, Symantec executives communicated with a
Morgan Stanley analyst and told her:
- Customer acceptance of Symantec's Windows 95-related
products was "STRONG" and sales of these products were
"BEATING EXPECTATIONS."
Morgan Stanley reported this information to the market, where it became part of
the total mix of information affecting Symantec's stock price.
39. On October 25, 1995, Symantec issued a press release reporting
revenues, net income and earnings per share of $102.8 million, $12.9 million and
$.31, respectively for its second quarter of fiscal 1996, ended September 29,
1995. These were very good results, showing strong revenue, net income and
earnings per share growth from the same period in the prior year and from the
prior quarter. The October 25, 1995 release also stated:
"THROUGH THE FIRST TWO MONTHS SINCE THE GENERAL RELEASE
OF WINDOWS 95, WE ARE AMONG THE INDUSTRY LEADERS IN TERMS
OF ATTACH-RATE TO WINDOWS 95 SALES," said Gordon E.
Eubanks, Jr., president and CEO of Symantec Corporation.
"OUR ESSENTIAL SYSTEM UTILITY SOFTWARE HAS PROMPTED MANY
- 29 -
<PAGE>
CUSTOMERS TO BUY SYMANTEC PRODUCTS AT THE SAME TIME THEY BUY WINDOWS 95."
The October 25, 1995 release also stated that Symantec had signed a definitive
agreement to acquire Delrina, subject to a shareholder vote.
40. On October 25, 1995, Eubanks and Bain also communicated with
securities analysts and told them:
- Symantec's excellent second quarter results "EXCEEDED EXPECTATIONS."
- Symantec's excellent second quarter results were fueled by "STRONG
SALES" of its Windows 95 utility products.
- Symantec's reported earnings per share would have been even higher had
it not been for the company's "CONSERVATIVE APPROACH TO REVENUE RECOGNITION
FOR WINDOWS 95 PRODUCTS."
- Symantec had also established "CONSERVATIVE" reserve levels, reserving
not only against distributor inventory levels, but also against retail
inventory levels, effectively only recognizing revenue or product
sell-through at the retail level.
- These "CONSERVATIVE" practices would enable Symantec to report even
higher than expected earnings per share in the last two quarters of fiscal
1996.
- The Windows 95 launch had been VERY SUCCESSFUL for Symantec and
Symantec's outlook was for solid earnings per share momentum for the next
12-18 months.
- Symantec expected to achieve fiscal 1996 earnings per share of $1.25+
with further gains in fiscal 1997 to $1.40+.
- Symantec expected to achieve earnings per share of $.33 in its third
quarter of fiscal 1996 to end December 31, 1995, even though the Delrina
acquisition was expected to cause some earnings dilution in that quarter.
Analysts reported this information to the market where it became part of the
total mix of information affecting Symantec's stock price.
- 30 -
<PAGE>
41. In late October, Symantec stock fell sharply from $30-3/8 on October
24, 1995 to $24-1/8 on October 31, 1995, due in part to concerns in the
investment community that there might be excessive inventories of Symantec's
Windows 95 utility products in the "channel." Symantec's executives were very
concerned about this decline in Symantec stock as, if it continued, it could
endanger stockholder approval of the Delrina acquisition, which was to be voted
on in November 1995.
42. On October 31, 1995, Symantec executives met with securities analysts
in connection with the American Electronics Association meeting in Monterey,
California. During this meeting, Eubanks and Bain told analysts:
- Symantec's business was doing VERY WELL and sales of its Windows 95
utility products were MEETING OR EXCEEDING EXPECTATIONS.
- Symantec now expected its fiscal 1996 earnings per share would be
approximately $1.35.
Securities analysts reported this information to the market and it became part
of the total mix of information affecting Symantec stock.
43. On or about November 9, 1995, Symantec executives communicated with
Alex. Brown & Sons and assured it that:
- Symantec's Norton applications are doing "VERY WELL" in the
marketplace, and that "ATTACH RATES" HAD INCREASED SINCE SEPTEMBER.
- Concerns over high inventory levels in the channel were UNWARRANTED as
Symantec recognized revenue on its utilities product line only on sell-
through plus 6 weeks and this reduced its exposure to product returns.
This information was reported to the market by Alex. Brown and became part of
the total mix of information affecting Symantec stock price.
- 31 -
<PAGE>
44. The positive reports referenced in Paragraphs 32-36, 38-40 and 42-43
helped to halt the decline in Symantec's stock price and stabilize it. On
November 20, 1995, Delrina's shareholders voted to approve the acquisition of
Delrina by Symantec.
45. On December 6, 1995, Symantec, through Eubanks, made a presentation at
the Montgomery Securities Technology Conference and was interviewed by REUTERS,
during which he stated:
- "[E]XCEPT FOR MICROSOFT CORP., NO SOFTWARE COMPANY STOOD TO GAIN AS
MUCH FROM THE SALE OF MICROSOFT'S WINDOWS 95 OPERATING SYSTEM" AS SYMANTEC
DID.
- "WE'RE GAINING MARKET SHARE BECAUSE OF WINDOWS 95. . . . Windows 95
is going to be a much bigger force than most people realize."
- Symantec expected calendar 1995 sales growth of "AT LEAST 30 PERCENT"
over calendar 1995 and pre-tax profit growth of 18 percent over 1995.
- Eubanks also expected to see 18 percent pre-tax profit year-over-year
growth beginning with the fourth quarter ending March 1996.
REUTERS and BLOOMBERG reported this information to the market where it became
part of the total mix of information affecting Symantec stock price.
46. On or about December 7, 1995, Symantec's executives communicated with
Donaldson, Lufkin & Jenrette and told them that:
- Symantec's business was doing "VERY WELL."
- The Windows 95 upgrade cycle was "GOING VERY WELL" for Symantec,
resulting in "STRONG SALES" of its Windows 95 utility products.
- Symantec expected to benefit from the Windows 95 upgrade cycle for
another 12-18 months.
Symantec stock rallied to a high of $27-3/8 after Donaldson Lufkin reported this
information to the market where it became part of the total mix of information
affecting Symantec's stock price.
- 32 -
<PAGE>
DISCLOSURE OF THE TROUBLED
NATURE OF SYMANTEC'S BUSINESS
47. In the last two weeks of December 1995, Symantec stock declined and
then, on January 4, 5 and 8, 1996, Symantec stock plunged from $22-1/2 to
$15-3/8 per share--a 32% decline--on 11 million shares volume, as information
leaked into the marketplace that sales of Symantec's Windows 95 utility products
might not be as strong as earlier indicated. On January 8, 1996, after the close
of trading, Symantec shocked the market by revealing that its results for the
quarter ending December 31, 1995 would be much worse than earlier forecast with
little or no revenue growth from the second quarter and results from continuing
operations likely to show a loss. The next day, Symantec's stock collapsed to
$10-1/8--a 34% one-day decline on huge volume of 15.9 million shares--the
largest one-day percentage decline in its stock price on the largest one-day
stock volume in Symantec's history. Eubanks admitted Symantec's earlier
shortfall was due to poor sales and large returns of Symantec's Windows 95
utility products and poor sales of its products in Europe, admitting "WE HAD A
TERRIBLE QUARTER. WE SCREWED UP." Analysts immediately cut their earnings
forecasts for Symantec for the fourth quarter of fiscal 1996, fiscal 1996 as a
whole and for fiscal 1997. Later, Symantec announced that its revenues for the
December 1995 quarter were $111 million (a decline from the third quarter) and
that it actually suffered an operating loss of $1.1 million!
48. Each of the positive statements about Symantec's business made by
defendants during the Class Period was materially false and misleading when
issued, and failed to disclose, INTER ALIA, the
- 33 -
<PAGE>
following adverse information, disclosure of which was necessary to make the
statements made not false and misleading, and which facts were then known only
to defendants due to their access to internal Symantec corporate data:
(a) Symantec's Windows 95 utility software products (Navigator,
AntiVirus and Utilities) were selling poorly at retail and below the levels
forecast by the Company, which would result in large distributor/reseller
returns of those products well in excess of amounts Symantec had reserved for OR
in sharply diminished distributor/reseller reorders of those products, causing
Symantec to not achieve the revenue and income growth forecast by and for it for
the last half of fiscal 1996;
(b) Sales of Symantec's Windows 95 Utilities, Navigator and AntiVirus
products were not meeting or exceeding Symantec's expectations and in fact were
below expectations, due to (i) lower than anticipated sales of Windows 95; AND
(ii) lower than anticipated "attach rates" of Symantec utility products to
Windows 95, as Windows 95 came equipped with a large number of built-in
utilities, thus diminishing the need for and attractiveness of Symantec's
products;
(c) Symantec was not encountering a good "attach rate" with respect
to the sale of its products along with Windows 95 and in fact the "attach rate"
was below expectations because Windows 95 came equipped with a large number of
built-in utilities, thus making Symantec's products less necessary or attractive
to purchasers of Windows 95;
(d) Sales of Symantec's Windows 95 utility software products were not
strong and were not beating or exceeding
- 34 -
<PAGE>
expectations, and in fact, sales of such products at the retail level were weak
and well below Symantec's expectations, meaning that Symantec's reserves for
product returns by distributors and resellers were grossly inadequate;
(e) Sales of Symantec's enterprise products were weak and below
internal goals and budgets;
(f) Symantec's European sales were well below Symantec's expectations
and doing very poorly due to competitive pressures and localized negative
economic factors;
(g) The problems identified in Paragraph 48(a)-(f) above, were
causing Symantec to fall short of its planned revenue and earnings growth and
made it impossible for Symantec to meet the revenue and earnings forecasts made
by and for it for the third and fourth quarters of fiscal 1996 and fiscal 1996
as a whole;
(h) Symantec was not following a conservative approach with respect
to revenue recognition on its Windows 95 utility products and in fact was
improperly recognizing revenue on these products in violation of GAAP, thus
inflating its financial results and concealing the poor sales or "attach rates"
of these products and the deterioration of Symantec's business overall;
(i) Symantec's reported revenues and earnings per share for the first
and second quarters of fiscal 1996 (ended June 30 and September 29, 1995) were
artificially inflated due to the improper recognition of revenue via the
accounting artifices and tricks detailed in this Complaint;
(j) Symantec's method of accounting for its Windows 95 utility
products was not "conservative" or such that it would result in strengthening
Symantec's reported profits in the last
- 35 -
<PAGE>
half of fiscal 1996, but, in fact, the contrary was true, since Symantec was
violating GAAP in the manner in which it was recognizing revenue in Europe and
on the sale of its Windows 95 utility products, which would result in massive
returns and/or reduced shipments of those products later on in fiscal 1996,
hurting Symantec's reported profits;
(k) In order to cover up the weak sales of its Windows 95-related
products, its enterprise products and its poor European results, Symantec was
falsifying its reported financial results by improperly recognizing millions in
revenue, thus inflating its reported revenues, income and earnings per share;
(l) It was not true that except for Microsoft no software company
stood to gain as much from the sale of Microsoft Windows 95 operating systems as
Symantec did as defendants knew that Windows 95 came equipped with a large
number of built-in utilities and this diminished the desirability of or
necessity for Symantec's products among purchasers of Windows 95 and this, in
fact, was very adversely affecting retail sales of Symantec's Windows 95 utility
products;
(m) Because defendants knew that Windows 95 would come equipped with
a large amount of built-in utilities which would greatly diminish the need for
and appeal of Symantec's stand-alone Windows 95 utility software product,
Symantec's statement that it would be a major beneficiary from the Windows 95
upgrade cycle was known by defendants to be false;
(n) Defendants' positive forecasts and projections regarding
Symantec's Windows 95 utility product line and its revenues or earnings growth
during the balance of fiscal 1996 were
- 36 -
<PAGE>
known by defendants to be false as they were inconsistent with the above
negative factors; and
(o) Defendants' forecasts of increased earnings for Symantec in
fiscal 1996 of $1.25-$1.35 and of earnings per share of $.31-$.33 for the third
quarter of fiscal 1996, were known by defendants to be false as they were
contradicted by the adverse facts set forth above.
SYMANTEC'S FINANCIAL MANIPULATIONS
AND FALSE FINANCIAL STATEMENTS
49. Much of Symantec's revenue came from sales to customers which have the
right of return. Symantec's two largest distributors (Ingram Micro and Merisel)
demanded that Symantec accept returns of unsold merchandise. Symantec also
offered other customers return privileges in an effort to have those customers
accept large amounts of inventory, especially of its Windows 95 utility
products. During the quarter ended September 29, 1995, Symantec was selling a
new product for Windows 95 for which Symantec had no experience and was selling
it to many new customers. Thus, it was impossible for Symantec to reasonably
estimate future returns. Based on the return privileges Symantec granted its
customers and its inability to estimate future returns, Symantec should have
deferred all such sales until the right of return expired. Rather than deferring
revenue recognition for such sales, as required by GAAP under these
circumstances, Symantec reserved only a portion of such sales, thus improperly
inflating its reported results in the first and second quarters. During the
quarter ended June 30, 1995, Symantec recognized revenue from
- 37 -
<PAGE>
sales, including sales in Europe by Central Pointe, which were contingent on
resale and the right of return had not expired.
50. During 1995, Symantec focused an enormous amount of attention on
launching its utility software products to run on Windows 95 which was released
in the summer of 1995. The success of these products (Norton Navigator,
Utilities and AntiVirus) was extraordinarily important to Symantec as Symantec
has experienced almost no revenue growth for nearly two years. The Windows 95
introduction was expected to provide this badly needed revenue growth for
Symantec. In fact, the quarter in which Windows 95 and Symantec's associated
utility products first shipped, the quarter ended September 29, 1995,
represented the first real revenue growth Symantec had been able to report in a
long time. Note the trend in Symantec's quarterly sales:
Symantec Corporation
Quarterly Sales
[graph]
- 38 -
<PAGE>
However, much, if not all, of Symantec's revenue growth in the June and
September 1995 quarters came as the result of improper revenue recognition
wherein Symantec recorded as revenue, sales to distributors, retailers and other
resellers where their obligation to pay Symantec was contingent on their resale
of the product and sales for which Symantec could not reasonably estimate future
returns.
51. In the Form 10-Q for the quarter ended September 29, 1995, the notes
to the financial statements contained the following representations:
The consolidated financial statements of Symantec Corporation ("Symantec"
or the "Company") as of September 30, 1995 and for the three and six months
ended September 30, 1995 and 1994 are unaudited and, in the opinion of
management, CONTAIN ALL ADJUSTMENTS, CONSISTING OF ONLY NORMAL RECURRING
ITEMS NECESSARY FOR THE FAIR PRESENTATION OF THE FINANCIAL POSITION AND
RESULTS OF OPERATIONS FOR THE INTERIM PERIODS.
A similar paragraph was included in the Form 10-Q for the quarter ended June 30,
1995. These Form 10-Qs were signed by Dykes and Bain.
52. This statement was false and misleading as Symantec's results in the
first and second quarters were artificially and improperly inflated by reporting
revenue from purported sales which were contingent on resale, causing Symantec's
financial statements to be presented in violation of GAAP.
53. GAAP are those principles recognized by the accounting profession as
the conventions, rules and procedures necessary to define accepted accounting
practice at a particular time. Regulation S-X (17 C.F.R. 210.4-01(a)(1)) states
that financial
- 39 -
<PAGE>
statements filed with the SEC which are not prepared in compliance with GAAP are
presumed to be misleading and inaccurate.
54. Because Symantec granted its customers significant rights to return
product, its revenue recognition was controlled by Statement of Financial
Accounting Standards ("SFAS") No. 48. SFAS No. 48, entitled "Revenue
Recognition When Right of Return Exists," requires that six conditions of ALL be
met for revenue recognition where the right of return exists. SEE SFAS No. 48,
PARA 6. Otherwise, revenue recognition MUST be deferred until all these
conditions are satisfied.
55. In the quarter ended June 30, 1995, Symantec recognized material
amounts of revenue on shipments to customers who had the right to return unsold
product, including shipments Central Pointe made in Europe in the prior year,
even though Symantec knew that the right of return had not expired on many of
the shipments and much of the product was still in the channel. Symantec knew
that such revenue recognition violated GAAP and SFAS No. 48.
56. In the quarter ended September 29, 1995, Symantec shipped large
quantities of its utility products for Windows 95 to distributors, retailers and
other resellers in anticipation of the introduction of Windows 95 in August
1995. In order to convince its customers to accept such large inventories of
its products, Symantec offered the customers expansive rights to return unsold
product and offered to help the customer sell the product to end-users. The
Company knew such "sales" were not properly recognizable as revenue as the
conditions of SFAS No. 48 had not been complied with. However, in order to
report financial results in line with market expectations, the Company
recognized the
- 40 -
<PAGE>
revenue and merely reserved and deferred a small portion of the sales based on
"inventories estimated to be in excess of levels deemed appropriate in the
distribution channel." Thus, contrary to SFAS No. 48's clear and concise
requirement that revenue be deferred until the contingency is removed, Symantec
used an ambiguous and subjective standard of reserving for "estimated" returns
or for excess channel inventory not "deemed appropriate." The amount of the
Company's reserves was much lower than the amount of revenue which would have
been deferred had the Company complied with GAAP and SFAS No. 48. Symantec was
required to defer revenue by SFAS No. 48; Symantec's sales of these products
failed to satisfy at least the following three requirements of SFAS No. 48,
PARA 6.
(a) SFAS No. 48, PARA 6 (b): "The buyer has paid the seller, or the
buyer is obligated to pay the seller and the obligation is not contingent on
resale of the product." SEE ALSO AICPA Statement of Position ("SOP") 91-1
(Software Revenue Recognition), PARA 58, which discusses factors which a
software seller should consider when selling to resellers, including:
Business practices, the reseller's operating history, competitive
pressures, formal or informal communications, or factors that indicate
that payment is contingent on the reseller's success in distributing
individual units.
Many of Symantec's sales in the September 1995 Quarter were, in effect,
contingent on resale. In addition to Ingram Micro and Merisel, Symantec has
admitted that it also offered return privileges for unsold product to other
retailers and distributors. Nevertheless, in violation of SFAS No. 48, Symantec
did not defer revenue recognition, but rather, Symantec only deferred net
- 41 -
<PAGE>
revenues associated with distribution inventories estimated to be in excess of
levels "deemed appropriate" in the distribution channel. This ambiguous
standard was abused by Symantec to inflate its required results;
(b) SFAS No. 48 PARA 6 (e): "The seller does not have significant
obligations for future performance to directly bring about resale of the product
by the buyer." Symantec employed significant resources in assisting its
resellers to "sell-through" Symantec's products. It has admitted that it
employs a distribution sales group to work closely with its major distributor
and reseller accounts on the management of orders, inventory level and
sell-through to retailers, as well as promotions and selling activities.
Symantec was either contractually obligated to assist in bringing about resale
of products or it was doing so because it knew its sales were contingent on
resale of its products by resellers/distributors and, in some instances,
retailers; and
(c) SFAS No. 48, PARA 6 (f): "The amount of future returns can be
reasonably estimated." SEE ALSO SOP 91-1.58:
Uncertainties about the potential number of copies to be sold by the
reseller because of such factors as the newness of the product or marketing
channel, competitive products, or dependence on the market potential of
another product offered by the reseller, may indicate that profit cannot be
reasonably estimated on delivery. If so, revenue should not be recognized
until the vendor can reasonably determine that the transaction is viable
for both parties or that the reseller is willing to honor and is capable of
honoring the commitment to make the fixed payments.
At September 29, 1995, there were major changes in business conditions,
customers and products which prevented Symantec from being able to reasonably
estimate future returns. Thus, revenue from those transactions should have been
deferred. The September
- 42 -
<PAGE>
1995 quarter was the quarter in which Symantec first shipped its Windows 95
products in volume. While Symantec deferred some revenue associated with these
sales and increased its allowance for returns, none of the revenue was properly
recognized or recorded. Under GAAP, Symantec should have deferred all revenue
associated with sales of its Windows 95-related utility products, which were
contingent on resale, as Symantec could not actually estimate future returns for
the following reasons:
(i) Symantec's Windows 95-related products were new to the
market and to Symantec. There was a serious question whether Symantec's utility
program would even be necessary with Windows 95 since Windows 95 came with so
many more built-in utilities that earlier versions of Windows;
(ii) Symantec was dealing with many new customers, new to both
Symantec and to PC software sales. These smaller customers were less
predictable both in terms of ordering practices and selling trends;
(iii) Symantec was selling enterprise systems which were subject
to acceptance for many customers and, in fact, these sales were not going well;
and
(iv) Price competition was becoming more severe, which would
indicate a greater risk of returns, as customers became aware that they could
get lower prices elsewhere.
57. Ultimately, Symantec's improper revenue recognition in the
September 1995 quarter resulted in poor sales in the December 1995 quarter. THE
SHORTFALL IN DECEMBER WAS QUITE REMARKABLE. WHILE WINDOWS 95 UTILITY PRODUCT
SALES WERE $43 MILLION IN THE
- 43 -
<PAGE>
QUARTER ENDED SEPTEMBER 29, 1995, THEY WERE ONLY ABOUT $22 MILLION IN THE
QUARTER ENDED DECEMBER 30, 1995.
58. On January 8, 1996, when Symantec shocked the market with the
announcement that its third quarter fiscal 1996 revenues -- the first quarter
AFTER the shipment of its Windows 95-related utility products -- would be below
prior forecasts and that operating income would only be, at best, slightly above
breakeven, the explanations it provided to analysts were:
"THE PRIMARY REASON FOR THE REVENUE SHORTFALL WAS GREATER-THAN-ANTICIPATED
RETURNS OF WINDOWS 95 ADVANCED UTILITIES (NORTON UTILITIES) PRODUCTS by
small retail distributors following the company's large initial sell-in the
September quarter -- $20 MILLION OF SUCH PRODUCT CAME BACK."
Returns from secondary retailers (over-purchasing in August, returns in
Q4).
Had Symantec properly deferred revenue recognition for sales which were
contingent on resale, as required by SFAS No. 48, such huge returns would not
have negatively impacted its reported third quarter fiscal 1996 earnings and its
first and second quarters fiscal 1996 revenue and earnings would have been much
lower and shown little growth.
59. Due to these improprieties, the Company presented its results in a
manner which violated the following generally accepted accounting principles,
among others:
(a) The principle that financial reporting should provide information
that is useful to present and potential investors and creditors and other users
in making rational investment, credit and similar decisions was violated (FASB
Statement of Concepts No. 1, PARA 34);
- 44 -
<PAGE>
(b) The principle that financial reporting should provide information
about the economic resources of an enterprise, the claims to those resources,
and the effects of transactions, events and circumstances that change resources
and claims to those resources was violated (FASB Statement of Concepts No. 1,
PARA 40);
(c) The principle that financial reporting should provide information
about how management of an enterprise has discharged its stewardship
responsibility to owners (stockholders) for the use of enterprise resources
entrusted to it was violated. To the extent that management offers securities
of the enterprise to the public, it voluntarily accepts wider responsibilities
for accountability to prospective investors and to the public in general (FASB
Statement of Concepts No. 1, PARA 50);
(d) The principle that financial reporting should provide information
about an enterprise's financial performance during a period was violated.
Investors and creditors often use information about the past to help in
accessing the prospects of an enterprise. Thus, although investment and credit
decisions reflect investors' expectations about future enterprise performance,
those expectations are commonly based at least partly on evaluations of past
enterprise performance (FASB Statement of Concepts No. 1, PARA 42);
(e) The principle that financial reporting should be reliable in that
it represents what it purports to represent was violated. That information
should be reliable as well as relevant is a notion that is central to accounting
(FASB Statement of Concepts No. 2, PARA 58-59);
- 45 -
<PAGE>
(f) The principle of completeness, which means that nothing is left
out of the information that may be necessary to ensure that it validly
represents underlying events and conditions, was violated (FASB Statement of
Concepts No. 2, PARA 79); and
(g) The principle that conservatism be used as a prudent reaction to
uncertainty to try to ensure that uncertainties and risks inherent in business
situations are adequately considered was violated. The best way to avoid injury
to investors is to try to ensure that what is reported represents what it
purports to represent (FASB Statement of Concepts No. 2, PARA 95, 97).
60. The undisclosed adverse information concealed by defendants during the
Class Period is the type of information which, because of SEC regulations,
regulations of the nation stock exchanges and customary business practice, is
expected by investors and securities analysts to be disclosed and is known by
corporate officials and their legal and financial advisors to be the type of
information which is expected to be and must be disclosed.
DEFENDANTS' INSIDER SELLING
61. During April-July 1995, Symantec's insiders sold very little of their
Symantec stock, selling less than 21,000 shares during this four month period,
or about 5,000 shares per month. From January 1995 through July 1995,
Symantec's insiders sold only about 57,200 shares -- about 8,200 shares per
month. Symantec's insiders wanted to sell off large amounts of their Symantec
shares at profitable prices before the market learned what they already knew,
sales of Symantec's Windows 95-related utility products were
- 46 -
<PAGE>
poor, its European sales were weak and it was falsifying its financial
statements to conceal these adverse facts.
62. Thus, in August and September 1995, at the height of the Windows 95
hype and while Symantec's insiders were issuing false and misleading statements
about Symantec's business, including its Windows 95-related products, defendants
sold 382,899 shares of the Symantec stock they owned for proceeds of over $12
million, to profit from the artificial inflation of Symantec's stock price their
fraud had created before the truth became known and Symantec's stock price
crashed. Notwithstanding their access to material non-public information as a
result of their positions with the Company, the Individual Defendants sold the
following amounts of Symantec shares at artificially inflated prices throughout
the Class Period while in possession of material non-public information:
<TABLE>
<CAPTION>
DATE SHARES PRICE PROCEEDS OPTION
NAME SOLD SOLD PER SHARE FROM SALE PURCHASE PRICE
- ---- ---- ------ --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Eubanks, G. 08/09/95 9,700 $29.38 $ 284,986
08/09/95 15,300 $29.75 455,175
08/09/95 5,000 $29.78 148,900
08/23/95 30,000 $30.80 924,000 30,000 $ .50
08/23/95 75,000 $30.80 $2,310,000 75,000 $1.00
------- ----------
Total: 135,000 $4,123,061
------- ----------
------- ----------
Boesenberg, C. 08/14/95 8,333 $30.00 $ 249,990 8,333 $10.75
08/15/95 24,031 $30.00 720,930 24,031 $10.75
08/15/95 2,968 $30.00 89,040 2,988 $10.75
08/18/95 10,000 $31.15 311,500 10,000 $16.16
08/22/95 10,000 $30.00 300,000 10,000 $16.16
08/23/95 10,000 $31.00 310,000 10,000 $16.16
08/23/95 10,000 $30.50 305,000 10,000 $16.16
------- ----------
Total: 75,332 $2,286,460
------- ----------
------- ----------
Wang, E. 08/17/95 5,000 $31.63 $ 158,150 5,000 $10.50
------- ----------
------- ----------
Bain, H. 08/18/95 10,000 $31.63 $ 316,300 10,000 $11.00
09/08/95 1,904 $31.75 60,452 1,904 $11.00
09/08/95 1,430 $31.75 45,403 1,430 $11.00
09/08/95 2,952 $31.75 93,926 2,952 $11.00
09/08/95 3,714 $31.75 117,920 3,714 $11.00
01/02.96 1,102 $22.63 $ 24,938
Total: ------ ----------
21,102 $ 658,939
------ ----------
------ ----------
- 47 -
<PAGE>
Taylor, E. 08/28/95 2,000 $29.00 $ 58,000 2,000 $11.00
08/28/95 675 $29.00 19,575 675 $11.00
08/28/95 325 $29.00 9,425 325 $16.00
08/30/95 7,000 $28.00 196,000 7,000 $16.00
08/31/95 5,092 $29.00 147,668 5,092 $16.00
08/31/95 5,218 $29.00 151,322 5,218 $16.00
09/01/95 864 $29.50 $ 25,488 864 $16.00
------- ----------
Total: 21,174 $ 607,478
------- ----------
------- ----------
Dykes, R. 09/01/95 24,652 $30.64 $ 755,337 24,652 $16.94
09/01/95 6,596 $30.64 202,101 6,596 $16.94
09/01/95 11,808 $30.64 361,797 11,808 $16.94
09/01/95 6,944 $30.64 212,764 6,944 $16.94
09/01/95 50,000 $30.64 $1,512,000 50,000 $12.75
------- ----------
Total: 100,000 $3,043,999
------- ----------
------- ----------
Laing, J. 09/01/95 6,148 $31.00 $ 190,588 6,148 $11.00
09/01/95 3,852 $31.00 119,412 3,852 $11.00
09/01/95 1,400 $31.00 43,400
01/02/96 100 $22.88 2,288
------- ----------
Total: 11,500 $ 355,688
------- ----------
------- ----------
Witte,D. 09/05/95 8,000 $31.07 $ 248,560 8,000 $10.25
09/05/95 1,822 $31.07 56,610 1,822 $11.00
09/05/95 1,303 $31.07 40,484 1,303 $11.00
09/05/95 2,153 $31.07 66,894 2,153 $11.00
09/05/95 347 $31.07 10,781 347 $11.00
09/05/95 3,093 $31.07 96,100 3,093 $13.25
09/05/95 5,868 $31.07 182,319 5,868 $14.50
09/05/95 93 $31.07 2,890 93 $14.50
09/05/95 1,218 $31.07 37,843 1,218 $13.50
09/05/95 750 $31.07 23,303 750 $13.50
09/06/95 1,146 $32.00 $ 36,672
------- ----------
Total: 25,793 $ 802,456
------- ----------
------- ----------
GRAND TOTAL: 394,901 $12,036,231
------- -----------
------- -----------
</TABLE>
63. This insider selling by the Individual Defendants was highly unusual,
both in its timing and in its amount. These sales came just after the purported
successful introduction of a major new product line by Symantec that was
supposed to push its earnings higher for several quarters, presumably resulting
in substantial appreciation in Symantec's stock price over that time period --
yet the defendants bailed-out at the very beginning. During the two months
preceding August and September 1995, Symantec's insiders sold only about 3,000
shares of Symantec stock. In the prior four months, they sold only about 21,000
shares. In all of 1995, prior to their August-September selling spree, they
sold only about 57,200 shares, or about 8,200 shares per month, contrasted with
- 48 -
<PAGE>
382,899 shares sold in August-September insider bailout. Also, these stock sales
took place just 90+ days BEFORE Symantec revealed "terrible" results from the
sales of a new product line that defendants said was "meeting or beating
expectations," while they were unloading their shares.
FIRST CAUSE OF ACTION
Violation of sections 25400 and 25500 of
the California Corporations Code
64. Plaintiffs incorporate PARA 1-63.
65. Acting individually and pursuant to a scheme and conspiracy and while
aiding and abetting each other, defendants concealed and/or misrepresented
material adverse information regarding Symantec. Defendant's wrongdoing
included the making of and/or participation in the making of, untrue statements
of material facts and the omission to state material facts necessary in order to
make the statements made, in light of the circumstances under which they were
made, not misleading, and engaging in acts, practices and a course of conduct
which operated as a fraud and deceit upon plaintiffs and members of the Class in
order to induce the purchase of Symantec stock by plaintiffs and the members of
the Class, while Symantec and the Individual Defendants were selling Symantec
stock.
66. Plaintiffs and the members of the Class have suffered substantial
damages because, in reliance on the integrity of the market, they paid
artificially inflated prices for Symantec stock. Plaintiffs and the members of
the Class would not have purchased Symantec stock at the prices they paid, or at
all, if they had been aware that the market price had been artificially and
falsely
- 49 -
<PAGE>
inflated by defendants' misleading statements and concealments. At the time of
the purchases by plaintiffs and the members of the Class of Symantec stock, the
fair market value of said stock was substantially less than the prices paid by
them.
67. By reason of the foregoing, defendants violated Section 25400 of the
Cal. Corp. Code, thereby entitling the members of the Class to recover damages
pursuant to Section 25500.
SECOND CAUSE OF ACTION
Violation of Sections 1709-1710 of
the California Civil Code
68. Plaintiffs incorporate Paragraphs 1-63, 65-66.
69. For the purpose of inducing public investors, including plaintiffs and
other members of the Class, to purchase or otherwise acquire Symantec stock, and
with intent to deceive such investors, the defendants employed a scheme and
conspiracy to defraud and aided and abetted each other as a part of which said
defendants made, participated in the making of, or aided and abetted the making
of, misrepresentations of fact and concealed the true facts and omitted to state
material facts as set forth above. Said representations and statements were not
true and defendants did not believe them to be true. Said acts by defendants
were fraudulent, oppressive and malicious.
70. Plaintiffs and the Class members each relied on one or more of the
false statements alleged herein and were damaged thereby.
BASIS OF ALLEGATIONS
71. Plaintiffs have alleged the foregoing based upon the investigation of
their counsel, which included a review of
- 50 -
<PAGE>
Symantec's SEC filings, securities analysts' reports and advisories about the
Company, press releases issued by the Company, media reports about the Company
and discussions with consultants, and believe that substantial evidentiary
support will exist for the allegations set forth in Paragraphs 1, 3, 6, 8, 10,
22-26, 28, 31, 33 and 48-50, 52, 53, 59-62 after a reasonable opportunity for
discovery.
PRAYER FOR RELIEF
WHEREFORE, plaintiffs pray for judgment as follows:
1. Declaring this action to be a proper class action on behalf of the
Class defined herein;
2. Awarding plaintiffs and the members of the Class compensatory and/or
punitive damages;
3. Awarding plaintiffs and the members of the Class pre-judgment and
post-judgment interest, as well as reasonable attorneys' fees, expert witness
fees and other costs;
4. Awarding extraordinary, equitable and/or injunctive relief as permitted
by law, equity and the appropriate state law remedies; and
5. Awarding such other relief as this Court may deem just and proper.
JURY DEMAND
Plaintiffs demand a trial by jury.
DATED: March 11, 1996
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH
ALAN SCHULMAN
BLAKE M. HARPER
/s/ WILLIAM S. LERACH
-------------------------
WILLIAM S. LERACH
- 51 -
<PAGE>
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
KAPLAN, KILSHEIMER & FOX, LLP
ROBERT N. KAPLAN
685 Third Avenue, 26th Floor
New York, NY 10017
Telephone: 212/687-1980
Attorneys for Plaintiffs
- 52 -
<PAGE>
SUMMONS
(CITACION JUDICIAL)
----------------------
FOR COURT USE ONLY
NOTICE TO DEFENDANT:
GORDON EUBANKS, CHARLES BOESENBERG, EUGENE WANG,
HOWARD BAIN, ELLEN TAYLOR, ROBERT DYKES, JOHN
LAING, DEREK WITTE and SYMANTEC CORPORATION
YOU ARE BEING SUED BY PLAINTIFF:
STEVEN COOPERMAN and ERIC D. FREED, IRA, On Behalf of
Themselves and All Others Similarly Situated
----------------------
- -------------------------------------------------------------------------------
YOU HAVE 30 CALENDAR DAYS AFTER THIS SUMMONS IS SERVED ON YOU TO FILE A
TYPEWRITTEN RESPONSE AT THIS COURT.
A LETTER OR PHONE CALL WILL NOT PROTECT YOU; YOUR TYPEWRITTEN RESPONSE MUST
BE IN PROPER LEGAL FORM IF YOU WANT THE COURT TO HEAR YOUR CASE.
IF YOU DO NOT FILE YOUR RESPONSE ON TIME, YOU MAY LOSE THE CASE, AND YOUR
WAGES, MONEY AND PROPERTY MAY BE TAKEN WITHOUT FURTHER WARNING FROM THE
COURT.
THERE ARE OTHER LEGAL REQUIREMENTS. YOU MAY WANT TO CALL AN ATTORNEY RIGHT
AWAY. IF YOU DO NOT KNOW AN ATTORNEY, YOU MAY CALL AN ATTORNEY REFERRAL
SERVICE OR A LEGAL AID OFFICE (LISTED IN THE PHONE BOOK).
- -------------------------------------------------------------------------------
The name and address of the court is: CASE NUMBER
CV756665
Santa Clara County Superior Court ---------------------------
191 North First Street
San Jose, CA 95113
The name, address, and telephone number of plaintiff's attorney, or plaintiff
without an attorney, is:
William S. Lerach
Milberg Weiss Bershad Hynes & Lerach
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
- ------------------------------------------------------------------------------
DATE: MAR 18 1996 Clerk, by /s/ B. RHODES STEPHEN V. LOVE Deputy
----------------------------------
B. RHODES
[SEAL] NOTICE TO THE PERSON SERVED: You are served
1. / / as an individual defendant.
2. / / as the person sued under the fictitious name of (SPECIFY):
3. /x/ on behalf of (SPECIFY): Symantec Corporation
under: /x/ CCP 416.10 (corporation) / / CCP 416.60 (minor)
/ / CCP 416.20 (defunct corporation) / / CCP 416.70 (conservatee)
/ / CCP 416.40 (association / / CCP 416.90 (individual)
or partnership)
/ / other:
4. / / by personal delivery on (DATE):
- -------------------------------------------------------------------------------
Form adopted by (See reverse for Proof Form 219 Co. Clk.
Rule 982 of Service) (Rev 1-84)
Judicial Council of California SUMMONS
<PAGE>
[SANTA CLARA COUNTY SUPERIOR COURT LETTERHEAD] [SEAL]
- -------------------------------------------------------------------------------
CASE NUMBER: CV756665
NOTICE TO LITIGANTS
1. Timely filing and service of pleadings is required per Local Rule 1.1.5.
2. All parties are responsible to be acquainted with the Local Rules of Court
and to acquire the proper forms. The rules and forms to be used by the
litigants are available for purchase through:
FORMS AND RULES RULES
Rose Printing Co. San Jose Post Record
20 N. First St., Ste. A 90 N. First St., Ste. 100
San Jose, CA 95113 San Jose, CA 95113
(408) 293-8177 (408) 287-4866
3. Notice is given that the Case Management Conference has been scheduled as
follows:
- ------------------------------------------------------------------------------
DATE: 07-16-96 TIME: 10:00 DEPT. 04
- ------------------------------------------------------------------------------
4. You must file and serve a completed Case Management Conference
Questionnaire and At-Issue Memorandum at least ten calendar days before the
Case Management Conference per Local Rule 1.1.7.
5. Counsel for each party and each self-represented party shall attend and be
fully prepared to participate effectively in the Case Management Conference
per Local Rule 1.1.6(D).
6. At the Case Management Conference the court will evaluate each case as
provided in the CRC 2106 and make appropriate pre-trial orders per Local
Rule 1.1.6(D).
- --------------------------------------------------------------------------------
SANCTIONS
If you do not file the Case Management Conference Questionnaire and At-Issue
Memorandum, attend the Case Management Conference and/or participate effectively
in the conference, the court may impose sanctions (including the dismissal of
the case and payment of money)
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 11.01
SYMANTEC CORPORATION
COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------------
(In thousands, except per share data) 1996 1995 1994
-------- ------- --------
<S> <C> <C> <C>
PRIMARY NET INCOME (LOSS) PER SHARE
Net income (loss) $(39,783) $33,409 $(44,421)
Interest on assumed conversion of convertible
subordinated debentures, and assumed
repayment of short-term and long-term
borrowings and investment in U.S.
government securities, net of income
tax effect -- 468 --
-------- ------- --------
Net income (loss), as adjusted $(39,783) $33,877 $(44,421)
-------- ------- --------
-------- ------- --------
Weighted average number of common
shares outstanding during the period 52,664 49,338 46,270
Shares issuable from assumed exercise
of options -- 9,606 --
Shares assumed repurchased with proceeds,
limited to 20% of total shares outstanding -- (6,763) --
-------- ------- --------
Common and common stock equivalent
shares outstanding for purpose of
calculating primary net income (loss)
per share 52,664 52,181 46,270
-------- ------- --------
-------- ------- --------
Primary net income (loss) per share $ (0.76) $ 0.65 $ (0.96)
-------- ------- --------
-------- ------- --------
FULLY DILUTED NET INCOME (LOSS) PER SHARE
Net income (loss) $(39,783) $33,409 $(44,421)
Interest on assumed conversion of convertible
subordinated debentures, and assumed
repayment of short-term and long-term
borrowings and investment in U.S.
government securities, net of income
tax effect -- 1,246 --
-------- ------- --------
Net income (loss), as adjusted $(39,783) $34,655 $(44,421)
-------- ------- --------
-------- ------- --------
Weighted average number of common
shares outstanding during the period 52,664 49,338 46,270
Shares issuable from assumed exercise
of options -- 10,031 --
Shares issuable from assumed conversion
of convertible subordinated debentures -- 2,083 --
Shares assumed repurchased with proceeds,
limited to 20% of total shares outstanding -- (4,961) --
-------- ------- --------
Total shares for purpose of calculating
fully diluted net income (loss) per share 52,664 56,491 46,270
-------- ------- --------
-------- ------- --------
Fully diluted net income (loss) per share $ (0.76) $ 0.61 $ (0.96)
-------- ------- --------
-------- ------- --------
</TABLE>
<PAGE>
EXHIBIT 21.01
<TABLE>
<CAPTION>
SYMANTEC CORPORATION
SUBSIDIARIES OF SYMANTEC
Name of Subsidiary State or Country of Incorporation
- ------------------ ---------------------------------
<S> <C>
AntiVirus Update (AVU) GmbH Germany
Central Point Software Deutschland GmbH Germany
Central Point Software, Inc. ("Central Point") Delaware, USA
Contact Software International GmbH Germany
CRS Online Ltd. Canada
Delrina Corporation (Canada) Canada
Delrina (Boston) Corporation Massachusetts, USA
Delrina (Canada) Corporation Canada
Delrina (Delaware) Corporation Delaware, USA
Delrina (France) Corporation SARL France
Delrina (Germany) GmbH Germany
Delrina (Seattle) Corporation Washington, USA
Delrina (UK) Corporation Limited United Kingdom
Delrina (US) Corporation Delaware, USA
Delrina (Washington) Corporation Washington, USA
Delrina (Wyoming) Limited Liability Company Wyoming, USA
Delrina International Corporation (Barbados) Barbados
Fifth Generation Systems GmbH Germany
Fifth Generation Systems PTE Ltd. (Singapore) Singapore
Fifth Generation Systems SARL France
1087013 Ontario Limited Canada
Sym (UK) Holding, Ltd. United Kingdom
Symantec (Canada) Ltd. Canada
Symantec (Deutschland) GmbH Germany
Symantec (Japan) KK (formerly Fifth Generation Systems KK) Japan
Symantec (UK) Ltd. ("Symantec UK") United Kingdom
Symantec Australia Pty. Ltd. Australia
Symantec EURL (France) France
Symantec Financing B.V. (Netherlands) Netherlands
Symantec Foreign Sales Corporation (Barbados) Barbados
Symantec Hong Kong Ltd. (formerly FGS Hong Kong Ltd.) Hong Kong
Symantec Limited (Ireland) Ireland
Symantec SRL (Italy) Italy
Zortech (UK) Ltd. United Kingdom
Zortech Limited ("Zortech") United Kingdom
</TABLE>
<PAGE>
EXHIBIT 23.01
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 33-31444, 33-32065, 33-33654, 33-37066, 33-42440, 33-44203, 33-
46927, 33-51612, 33-54396, 33-55300, 33-64290, 33-70558, 33-80360, 33-88694, 33-
60141, 33-64507 and Form S-3 Nos. 33-82012 and 33-63513) of our report dated
April 24, 1996, with respect to the consolidated financial statements and
schedule of Symantec Corporation included in the Annual Report (Form 10-K) for
the year ended March 31, 1996.
ERNST & YOUNG LLP
San Jose, California
June 20, 1996
<PAGE>
EXHIBIT 23.02
CONSENT OF PRICE WATERHOUSE, INDEPENDENT AUDITORS
June 20, 1996
The Board of Directors
Symantec Corporation:
We consent to incorporation by reference in the registration statements (No. 33-
31444, No. 33-32065, No. 33-33654, No. 33-37066, No. 33-42440, No. 33-44203, No.
33-46927, No. 33-51612, No. 33-54396, No. 33-55300, No. 33-64290, No. 33-70558,
No. 33-80360, No. 33-88694, No. 33-60141 and No. 33-64507) on Form S-8 and the
registration statements on Form S-3 (No. 33-82012 and No. 33-63513) filed by
Symantec Corporation of our report dated August 8, 1995, relating to the balance
sheet of Delrina Corporation as of June 30, 1995, and the related consolidated
statements of operations, retained earnings (deficit) and changes in financial
position for the years ended June 30, 1995 and 1994 which appears in the Fiscal
1996 Form 10-K of Symantec Corporation and the Form S-8 of Symantec Corporation
filed on or about June 26, 1996.
PRICE WATERHOUSE
Chartered Accountants
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SYMANTEC
CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDED MARCH 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000849399
<NAME> SYMANTEC CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 41,777
<SECURITIES> 87,422
<RECEIVABLES> 77,272
<ALLOWANCES> (5,016)
<INVENTORY> 7,893
<CURRENT-ASSETS> 236,862
<PP&E> 117,509
<DEPRECIATION> (65,811)
<TOTAL-ASSETS> 297,929
<CURRENT-LIABILITIES> 102,219
<BONDS> 15,393
0
0
<COMMON> 536
<OTHER-SE> 179,781
<TOTAL-LIABILITY-AND-EQUITY> 297,929
<SALES> 445,432
<TOTAL-REVENUES> 445,432
<CGS> 108,975
<TOTAL-COSTS> 108,975
<OTHER-EXPENSES> 384,736
<LOSS-PROVISION> 903
<INTEREST-EXPENSE> 1,495
<INCOME-PRETAX> (44,392)
<INCOME-TAX> (4,609)
<INCOME-CONTINUING> (39,783)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39,783)
<EPS-PRIMARY> (0.76)
<EPS-DILUTED> (0.76)
</TABLE>
