e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended January 1, 2010
or
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o |
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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 000-17781
Symantec Corporation
(Exact name of the registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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77-0181864
(I.R.S. employer
Identification no.) |
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350 Ellis Street,
Mountain View, California
(Address of principal executive offices)
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94043
(Zip Code) |
Registrants telephone number, including area code:
(650) 527-8000
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
Shares of Symantec common stock, $0.01 par value per share, outstanding as of January 29,
2010: 806,239,036 shares.
SYMANTEC CORPORATION
FORM 10-Q
Quarterly Period Ended January 1, 2010
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SYMANTEC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
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January 1, |
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April 3, |
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2010 |
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2009 |
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(Unaudited) |
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* |
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(In millions) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
2,593 |
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$ |
1,793 |
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Short-term investments |
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18 |
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199 |
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Trade accounts receivable, net |
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901 |
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837 |
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Inventories |
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24 |
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27 |
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Deferred income taxes |
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184 |
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163 |
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Other current assets |
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224 |
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278 |
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Total current assets |
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3,944 |
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3,297 |
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Property and equipment, net |
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990 |
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973 |
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Intangible assets, net |
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1,282 |
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1,639 |
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Goodwill |
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4,606 |
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4,561 |
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Investment in joint venture |
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60 |
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97 |
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Other long-term assets |
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67 |
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71 |
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Total assets |
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$ |
10,949 |
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$ |
10,638 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
198 |
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$ |
190 |
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Accrued compensation and benefits |
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362 |
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374 |
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Deferred revenue |
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2,680 |
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2,644 |
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Income taxes payable |
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27 |
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44 |
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Other current liabilities |
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333 |
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261 |
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Total current liabilities |
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3,600 |
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3,513 |
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Convertible senior notes |
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1,844 |
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1,766 |
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Long-term deferred revenue |
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369 |
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419 |
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Long-term deferred tax liabilities |
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178 |
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181 |
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Long-term income taxes payable |
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487 |
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522 |
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Other long-term liabilities |
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51 |
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90 |
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Total liabilities |
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6,529 |
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6,491 |
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Commitments and contingencies |
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Stockholders equity: |
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Common stock |
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8 |
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8 |
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Additional paid-in capital |
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9,061 |
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9,289 |
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Accumulated other comprehensive income |
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151 |
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186 |
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Accumulated deficit |
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(4,800 |
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(5,336 |
) |
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Total stockholders equity |
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4,420 |
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4,147 |
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Total liabilities and stockholders equity |
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$ |
10,949 |
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$ |
10,638 |
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* |
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Derived from audited financials, as adjusted for the retrospective adoption of
new authoritative guidance on convertible debt instruments. See Notes 1 and 4 for
further details. |
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.
3
SYMANTEC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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Three Months Ended |
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Nine Months Ended |
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January 1, |
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January 2, |
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January 1, |
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January 2, |
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2010 |
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2009* |
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2010 |
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2009* |
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(Unaudited) |
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(In millions, except per share data) |
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Net revenue: |
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Content, subscription, and maintenance |
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$ |
1,292 |
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$ |
1,197 |
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$ |
3,755 |
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$ |
3,669 |
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License |
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256 |
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317 |
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699 |
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1,013 |
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Total net revenue |
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1,548 |
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1,514 |
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4,454 |
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4,682 |
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Cost of revenue: |
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Content, subscription, and maintenance |
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208 |
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200 |
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624 |
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631 |
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License |
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6 |
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9 |
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16 |
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27 |
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Amortization of acquired product rights |
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44 |
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90 |
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189 |
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262 |
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Total cost of revenue |
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258 |
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299 |
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829 |
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920 |
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Gross profit |
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1,290 |
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1,215 |
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3,625 |
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3,762 |
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Operating expenses: |
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Sales and marketing |
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635 |
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581 |
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1,770 |
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1,841 |
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Research and development |
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210 |
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194 |
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641 |
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645 |
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General and administrative |
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92 |
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83 |
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265 |
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261 |
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Amortization of other purchased intangible assets |
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61 |
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60 |
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186 |
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171 |
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Restructuring |
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5 |
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47 |
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64 |
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73 |
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Impairment of goodwill |
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7,006 |
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7,006 |
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Loss and impairment of assets held for sale |
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10 |
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17 |
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13 |
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43 |
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Total operating expenses |
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1,013 |
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7,988 |
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2,939 |
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10,040 |
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Operating income (loss) |
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277 |
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(6,773 |
) |
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686 |
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(6,278 |
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Interest income |
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1 |
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5 |
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4 |
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35 |
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Interest expense |
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(33 |
) |
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(31 |
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(96 |
) |
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(94 |
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Other income, net |
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44 |
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17 |
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52 |
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8 |
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Income (loss) before income taxes and loss from joint venture |
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289 |
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(6,782 |
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646 |
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(6,329 |
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(Benefit) provision for income taxes |
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(23 |
) |
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22 |
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86 |
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160 |
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Loss from joint venture |
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12 |
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16 |
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37 |
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33 |
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Net income (loss) |
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$ |
300 |
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$ |
(6,820 |
) |
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$ |
523 |
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$ |
(6,522 |
) |
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Net income (loss) per share basic |
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$ |
0.37 |
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|
$ |
(8.25 |
) |
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$ |
0.64 |
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$ |
(7.81 |
) |
Net income (loss) per share diluted |
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$ |
0.37 |
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$ |
(8.25 |
) |
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$ |
0.64 |
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$ |
(7.81 |
) |
Weighted-average shares outstanding basic |
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809 |
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|
827 |
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812 |
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|
835 |
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Weighted-average shares outstanding diluted |
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|
819 |
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|
827 |
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|
|
822 |
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|
835 |
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* |
|
As adjusted for the retrospective adoption of new authoritative guidance
on convertible debt instruments. See Notes 1 and 4 for further details. |
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.
4
SYMANTEC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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Nine Months Ended |
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January 1, |
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January 2, |
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2010 |
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2009 * |
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(In millions) |
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(Unaudited) |
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OPERATING ACTIVITIES: |
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Net income (loss) |
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$ |
523 |
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$ |
(6,522 |
) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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Depreciation and amortization |
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563 |
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625 |
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Amortization of discount on convertible senior notes |
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77 |
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72 |
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Stock-based compensation expense |
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124 |
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123 |
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Loss and impairment of assets held for sale |
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13 |
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43 |
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Deferred income taxes |
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(3 |
) |
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(81 |
) |
Income tax benefit from the exercise of stock options |
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6 |
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17 |
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Excess income tax benefit from the exercise of stock options |
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(10 |
) |
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(16 |
) |
Loss from joint venture |
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37 |
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33 |
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Impairment of goodwill |
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7,006 |
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Net (gain) loss on legal liquidation of foreign entities |
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(46 |
) |
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5 |
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Other |
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1 |
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|
11 |
|
Net change in assets and liabilities, excluding the effects of acquisitions: |
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Trade accounts receivable, net |
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(47 |
) |
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(157 |
) |
Inventories |
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4 |
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6 |
|
Accounts payable |
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(42 |
) |
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(20 |
) |
Accrued compensation and benefits |
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(24 |
) |
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(45 |
) |
Deferred revenue |
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(95 |
) |
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(49 |
) |
Income taxes payable |
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(118 |
) |
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(17 |
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Other assets |
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4 |
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|
68 |
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Other liabilities |
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23 |
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(38 |
) |
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Net cash provided by operating activities |
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|
990 |
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1,064 |
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INVESTING ACTIVITIES: |
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Purchase of property and equipment |
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(149 |
) |
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(215 |
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Proceeds from sale of property and equipment |
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45 |
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40 |
|
Cash payments for business acquistions, net of cash acquired |
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(16 |
) |
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(1,045 |
) |
Purchase of equity investment |
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(16 |
) |
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Purchases of available-for-sale securities |
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(2 |
) |
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(223 |
) |
Proceeds from sales of available-for-sale securities |
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|
190 |
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|
679 |
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Net cash provided by (used in) investing activities |
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52 |
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(764 |
) |
FINANCING ACTIVITIES: |
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Net proceeds from sales of common stock under employee stock benefit plans |
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|
73 |
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|
189 |
|
Excess income tax benefit from the exercise of stock options |
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10 |
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|
16 |
|
Tax payments related to restricted stock issuance |
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(19 |
) |
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(15 |
) |
Repurchase of common stock |
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(364 |
) |
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|
(600 |
) |
Repayment of short-term borrowing |
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(200 |
) |
Repayment of other long-term liability |
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(4 |
) |
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|
(6 |
) |
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|
|
|
|
|
|
Net cash used in financing activities |
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|
(304 |
) |
|
|
(616 |
) |
Effect of exchange rate fluctuations on cash and cash equivalents |
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|
62 |
|
|
|
(125 |
) |
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
800 |
|
|
|
(441 |
) |
Beginning cash and cash equivalents |
|
|
1,793 |
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|
|
1,890 |
|
|
|
|
|
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|
Ending cash and cash equivalents |
|
$ |
2,593 |
|
|
$ |
1,449 |
|
|
|
|
|
|
|
|
|
|
|
* |
|
As adjusted for the retrospective adoption of new authoritative guidance on
convertible debt instruments. See Notes 1 and 4 for further details. |
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.
5
SYMANTEC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The condensed consolidated financial statements of Symantec Corporation (we, us, and our
refer to Symantec Corporation and all of its subsidiaries) as of January 1, 2010 and April 3, 2009,
and for the three and nine months ended January 1, 2010 and January 2, 2009, have been prepared in
accordance with the instructions on Form 10-Q pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC). In accordance with those rules and regulations, we
have omitted certain information and notes normally provided in our annual consolidated financial
statements. In the opinion of management, the condensed consolidated financial statements contain
all adjustments, consisting only of normal recurring items, except as otherwise noted, necessary
for the fair presentation of our financial position and results of operations for the interim
periods. The condensed consolidated balance sheet as of April 3, 2009 has been derived from our
annual consolidated financial statements, as adjusted for the retrospective adoption of new
authoritative guidance on accounting for convertible debt instruments. These condensed
consolidated financial statements should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included in our Annual Report on Form 10-K for the fiscal year ended
April 3, 2009. The results of operations for the three and nine months ended January 1, 2010 are
not necessarily indicative of the results expected for the entire fiscal year. All significant
intercompany accounts and transactions have been eliminated.
Fiscal Year End
We have a 52/53-week fiscal accounting year ending on the Friday closest to March 31. The
three months ended January 1, 2010 and January 2, 2009 both consisted of 13 weeks. The nine months
ended January 1, 2010 consisted of 39 weeks, whereas the nine months ended January 2, 2009
consisted of 40 weeks. Our 2010 fiscal year consists of 52 weeks and ends on April 2, 2010.
Significant Accounting Policies
There have been no changes in our significant accounting policies for the nine months ended
January 1, 2010 as compared to the significant accounting policies described in our Annual Report
on Form 10-K for the fiscal year ended April 3, 2009. As of April 4, 2009, we also adopted new
authoritative guidance on convertible debt instruments. See Note 4 for further details.
Financial Instruments
The following methods were used to estimate the fair value of each class of financial
instruments for which it is practicable to estimate that value:
Cash and Cash Equivalents. We consider all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Cash equivalents are recognized at fair
value. As of January 1, 2010, our cash equivalents consisted of $1.8 billion in money market funds
and $210 million in bank securities and deposits. As of April 3, 2009, our cash equivalents
consisted of $389 million in money market funds, $474 million in bank securities and deposits, and
$479 million in government securities.
Short-Term Investments. Short-term investments consist of marketable debt or equity
securities that are classified as available-for-sale and recognized at fair value. The
determination of fair value is further detailed in Note 2. Our portfolios consist of (1) debt
securities which include asset-backed securities, corporate securities and government securities,
and (2) marketable equity securities. As of January 1, 2010, our asset-backed securities
contractually mature after 10 years and corporate securities contractually mature within three
years. We regularly review our investment portfolio to identify and evaluate investments that have
indications of possible impairment. Factors considered in determining whether a loss is
other-than-temporary include: the length of time and extent to which the fair market value has been
lower than the cost basis, the financial condition and near-term prospects of the investee, credit
quality, likelihood of recovery, and our ability to hold the investment for a period of time
sufficient to allow for any anticipated recovery in fair market value.
Unrealized gains and losses, net of tax, and other-than-temporary impairments are included in
Accumulated other comprehensive income. The amortization of premiums and discounts on the
investments, realized gains and losses, and declines in value judged to be other-than-temporary on
available-for-sale debt securities are included in Other income, net. We use the
specific-identification method to determine cost in calculating realized gains and losses upon sale
of short-term investments.
6
Equity Investments. During the first quarter of fiscal 2010, we made an equity investment in a
privately held company whose business is complementary to our business. This investment is
accounted for under the cost method of accounting, as we hold less than 20% of the voting stock
outstanding and do not exert significant influence over this company. The investment is included
in Other long-term assets. We assess the recoverability of this investment by reviewing various
indicators of impairment and determine the fair value of this investment by performing a discounted
cash flow analysis of estimated future cash flows. If a decline in value is determined to be
other-than-temporary, impairment would be recognized and included in Other income, net. As of
January 1, 2010 and April 3, 2009, we held equity investments in privately-held companies of $17
million and $3 million, respectively. Other-than-temporary impairments related to these
investments were not material for the periods presented.
Derivative Instruments. We transact business in various foreign currencies and have foreign
currency risks associated with monetary assets and liabilities denominated in foreign currencies.
We utilize foreign currency forward contracts to reduce the risks associated with changes in
foreign currency exchange rates. Our forward contracts generally have terms of one to six months.
We do not use forward contracts for trading purposes. The gains and losses on the contracts are
intended to offset the gains and losses on the underlying transactions. Both the changes in fair
value of outstanding forward contracts and realized foreign exchange gains and losses are included
in Other income, net. Contract fair values are determined based on quoted prices for similar
assets or liabilities in active markets using inputs such as LIBOR, currency rates, forward points,
and commonly quoted credit risk data. For each fiscal period presented in this report, outstanding
derivative contracts and the related gains or losses were not material.
Convertible Senior Notes, Note Hedges and Revolving Credit Facility. Our convertible senior
notes are recorded at cost based upon par value at issuance less a discount for the estimated value
of the equity component of the notes, which is amortized through maturity as additional non-cash
interest expense. See Note 4 for further details. Debt issuance costs were recorded in Other
long-term assets and are being amortized to Interest expense using the effective interest method
over five years for the 0.75% Notes and seven years for the 1.00% Notes. In conjunction with the
issuance of the notes, we obtained hedges which would provide us with the option to purchase
additional common shares at a fixed price after conversion. The cost incurred in connection with
the note hedge transactions, net of the related tax benefit, and the proceeds from the sale of
warrants, was included as a net reduction in Additional paid-in capital. Borrowings under our $1
billion senior unsecured revolving credit facility are recognized at cost plus accrued interest
based upon stated interest rates.
Property and Equipment
Property and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
January 1, |
|
|
April 3, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In millions) |
|
Computer hardware and software |
|
$ |
1,203 |
|
|
$ |
1,041 |
|
Office furniture and equipment |
|
|
205 |
|
|
|
201 |
|
Buildings |
|
|
482 |
|
|
|
483 |
|
Leasehold improvements |
|
|
278 |
|
|
|
247 |
|
|
|
|
|
|
|
|
|
|
|
2,168 |
|
|
|
1,972 |
|
|
|
|
|
|
|
|
|
|
Less: accumulated depreciation and amortization |
|
|
(1,257 |
) |
|
|
(1,077 |
) |
|
|
|
|
|
|
|
|
|
|
911 |
|
|
|
895 |
|
Land |
|
|
79 |
|
|
|
78 |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
990 |
|
|
$ |
973 |
|
|
|
|
|
|
|
|
7
Comprehensive Income (Loss)
The components of comprehensive income (loss), net of tax, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
January 1, |
|
|
January 2, |
|
|
January 1, |
|
|
January 2, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(In millions) |
|
Net income (loss) |
|
$ |
300 |
|
|
$ |
(6,820 |
) |
|
$ |
523 |
|
|
$ |
(6,522 |
) |
Foreign currency translation adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustments arising during the period |
|
|
23 |
|
|
|
(28 |
) |
|
|
7 |
|
|
|
(9 |
) |
Less: reclassification adjustment for (gain) loss
included in net income (loss) |
|
|
(43 |
) |
|
|
|
|
|
|
(46 |
) |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net foreign currency translation adjustment |
|
|
(20 |
) |
|
|
(28 |
) |
|
|
(39 |
) |
|
|
(4 |
) |
Unrealized gain (loss) on available-for-sale securities |
|
|
1 |
|
|
|
(1 |
) |
|
|
4 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
|
(19 |
) |
|
|
(29 |
) |
|
|
(35 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
$ |
281 |
|
|
$ |
(6,849 |
) |
|
$ |
488 |
|
|
$ |
(6,528 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsequent Events Evaluation
Management has reviewed and evaluated material subsequent events from the balance sheet date
of January 1, 2010 through the financial statement issuance date
of February 5, 2010.
Recently Issued Authoritative Guidance
In October 2009, the Financial Accounting Standards Board (FASB) issued new authoritative
literature that provides guidance on determining multiple elements in an arrangement and how total
consideration should be allocated amongst the elements. It also expands disclosure requirements
for multiple-element arrangements. Concurrently, the FASB also issued new authoritative literature
for arrangements that include both software and tangible products.
This guidance excludes tangible products
and certain related elements from the scope of the revenue recognition authoritative guidance
specific to software transactions. The standards must both be adopted in the same period and can
be applied on a prospective basis for revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010, with earlier application permitted, or they can
be adopted on a retrospective basis. We expect to adopt the standards for our fiscal 2010 and we
do not expect that the adoption will have a material impact to our financial results. See Note 6
for further details regarding the impact of these standards on our joint venture.
In June 2009, the FASB issued new authoritative guidance that amends the consolidation
guidance applicable to variable interest entities (VIEs). The scope within the guidance now
includes qualifying special-purpose entities. The standard provides revised guidance on (1)
determining the primary beneficiary of the VIE, (2) how power is shared, (3) consideration for
kick-out, participating and protective rights, (4) reconsideration of the primary beneficiary, (5)
reconsideration of a VIE, (6) fees paid to decision makers or service providers, and (7)
presentation requirements. The statement is effective as of the first quarter of our fiscal 2011,
and early adoption is prohibited. We do not expect the adoption of this new authoritative guidance
to have a material impact on our consolidated financial statements.
Note 2. Fair Value Measurements
We measure assets and liabilities at fair value based on exit price as defined by the
authoritative guidance on fair value measurements, which represents the amount that would be
received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly
transaction between market participants. As such, fair value may be based on assumptions that
market participants would use in pricing an asset or liability. The authoritative guidance on fair
value measurements establishes a consistent framework for measuring fair value on either a
recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a
hierarchical level. The following are the hierarchical levels of inputs to measure fair value:
|
|
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or
liabilities in active markets. |
|
|
|
Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that
are not active; quoted prices for similar assets or liabilities in active markets; inputs
other than quoted prices that are observable for the assets or liabilities; or inputs that
are derived principally from or corroborated by observable market data by correlation or
other means. |
8
|
|
Level 3: Unobservable inputs reflecting our own assumptions incorporated in valuation
techniques used to determine fair value. These assumptions are required to be consistent with
market participant assumptions that are reasonably available. |
Assets Measured and Recorded at Fair Value on a Recurring Basis
The following table summarizes our assets that are measured at fair value on a recurring
basis, by level, within the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2010 |
|
|
As of April 3, 2009 |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
|
(In millions) |
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
1,777 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,777 |
|
|
$ |
389 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
389 |
|
Bank securities and deposits |
|
|
|
|
|
|
210 |
|
|
|
|
|
|
|
210 |
|
|
|
|
|
|
|
474 |
|
|
|
|
|
|
|
474 |
|
Government securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
479 |
|
|
|
|
|
|
|
479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash equivalents |
|
|
1,777 |
|
|
|
210 |
|
|
|
|
|
|
|
1,987 |
|
|
|
389 |
|
|
|
953 |
|
|
|
|
|
|
|
1,342 |
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed securities |
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
13 |
|
Corporate securities |
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
8 |
|
Government securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175 |
|
|
|
|
|
|
|
175 |
|
Marketable equity securities |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term investments |
|
|
5 |
|
|
|
13 |
|
|
|
|
|
|
|
18 |
|
|
|
3 |
|
|
|
196 |
|
|
|
|
|
|
|
199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,782 |
|
|
$ |
223 |
|
|
$ |
|
|
|
$ |
2,005 |
|
|
$ |
392 |
|
|
$ |
1,149 |
|
|
$ |
|
|
|
$ |
1,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2 fixed income available-for-sale securities are priced using quoted market prices for
similar instruments, nonbinding market prices that are corroborated by observable market data, or
discounted cash flow techniques.
Assets Measured and Recorded at Fair Value on a Nonrecurring Basis
The following table summarizes our assets measured at fair value on a nonrecurring basis, by
level, within the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment |
|
Impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
Nine Months |
|
|
January 1, |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended |
|
Ended |
|
|
2010 |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
January 1, 2010 |
|
January 1, 2010 |
|
|
(In millions) |
Assets held for sale |
|
$ |
4 |
|
|
$ |
|
|
|
$ |
4 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(3 |
) |
As part of our ongoing review of our real estate holdings, we determined that certain
properties were underutilized. As a result, we committed to sell properties with a total estimated
fair value, less costs to sell, of approximately $4 million and $59 million as of January 1, 2010
and April 3, 2009, respectively. Assets held for sale were written down during the nine months
ended January 1, 2010 and January 2, 2009 to reflect fair value less estimated costs to sell. The
fair value measurements were based on recent offers made by third parties to purchase the
properties or by valuation appraisals. Assets held for sale are included in Other current assets.
We sold a property for $42 million, which resulted in a loss of $10 million recorded during the
three and nine months ended January 1, 2010. We expect the sale of the remaining property to be
completed by the end of the second quarter of fiscal 2011.
9
Note 3. Investments
The following table summarizes our available-for-sale investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2010 |
|
|
As of April 3, 2009 |
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Estimated |
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Estimated |
|
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
|
|
(In millions) |
|
Asset-backed securities |
|
$ |
10 |
|
|
$ |
|
|
|
$ |
(1 |
) |
|
$ |
9 |
|
|
$ |
15 |
|
|
$ |
|
|
|
$ |
(2 |
) |
|
$ |
13 |
|
Corporate securities |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
8 |
|
Government securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175 |
|
|
|
|
|
|
|
|
|
|
|
175 |
|
Marketable equity securities |
|
|
2 |
|
|
|
3 |
|
|
|
|
|
|
|
5 |
|
|
|
2 |
|
|
|
1 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
16 |
|
|
$ |
3 |
|
|
$ |
(1 |
) |
|
$ |
18 |
|
|
$ |
200 |
|
|
$ |
1 |
|
|
$ |
(2 |
) |
|
$ |
199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides the gross unrealized losses and the fair market value of our
investments with unrealized losses that are not deemed to be other-than-temporarily impaired,
aggregated by investment category and length of time that individual securities have been in a
continuous unrealized loss position:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2010 |
|
As of April 3, 2009 |
|
|
Less than 12 |
|
12 Months or |
|
|
|
|
|
|
|
|
|
Less than 12 |
|
12 Months or |
|
|
|
|
Months |
|
Greater |
|
Total |
|
Months |
|
Greater |
|
Total |
|
|
Losses |
|
Fair Value |
|
Losses |
|
Fair Value |
|
Losses |
|
Fair Value |
|
Losses |
|
Fair Value |
|
Losses |
|
Fair Value |
|
Losses |
|
Fair Value |
|
|
(In millions) |
Asset-backed
securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
1 |
|
|
$ |
7 |
|
|
$ |
1 |
|
|
$ |
7 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2 |
|
|
$ |
13 |
|
|
$ |
2 |
|
|
$ |
13 |
|
Proceeds from sales, maturities, and principal pay downs related to available-for-sale
securities were $1 million and $11 million primarily from asset-backed securities for the three
months ended January 1, 2010 and January 2, 2009, respectively. Proceeds from sales, maturities,
and principal pay downs related to available-for-sale securities were $190 million primarily from
government securities and $679 million primarily from asset-backed securities for the nine months
ended January 1, 2010 and January 2, 2009, respectively. Gross realized losses on these sales were
not material for the same periods.
Note 4. Accounting for Convertible Debt Instruments
As of April 4, 2009, we adopted new authoritative guidance on convertible debt instruments,
which requires issuers of certain types of convertible notes to separately account for the
liability and equity components of such convertible notes in a manner that reflects the entitys
nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. This
guidance applies to the 0.75% Convertible Senior Notes due June 15, 2011 and the 1.00% Convertible
Senior Notes due June 15, 2013, collectively referred to as the Senior Notes. Prior to the
adoption of this guidance, the liability of the Senior Notes was carried at its principal value and
only the contractual interest expense was recognized in our Condensed Consolidated Statements of
Operations. Because this guidance requires retrospective adoption, we were required to adjust all
periods for which the Senior Notes were outstanding before the date of adoption.
Upon adoption of the new authoritative guidance on convertible debt instruments and effective
as of the issuance date of the Senior Notes, we recorded $586 million of the principal amount to
equity, representing the debt discount for the difference between our estimated nonconvertible debt
borrowing rate of 6.78% at the time of issuance and the coupon rate of the Senior Notes. This debt
discount, recorded in additional paid-in capital, is amortized as additional non-cash interest
expense over the contractual terms of the Senior Notes using the effective interest method. In
addition, we allocated $9 million of the issuance costs to the equity component of the Senior Notes
and the remaining $24 million of the issuance costs to the debt component of the Senior Notes. The
issuance costs were allocated pro rata based on the relative carrying amounts of the debt and
equity components. The $24 million of debt issuance costs allocated to the debt component is
amortized as interest expense over the respective contractual terms of the Senior Notes using the
effective interest method. Each $1,000 of principal of the Senior Notes will initially be
convertible into 52.2951 shares of Symantec common stock, which is the equivalent of $19.12 per
share, subject to adjustment upon the occurrence of specified events. As of January 1, 2010, the
remaining weighted-average amortization period of the discount and debt issuance costs is
approximately 3 years and the if-converted value of the Senior Notes does not exceed the principal
amount of the Senior Notes.
10
The following table summarizes information regarding the equity and liability components
of the Senior Notes:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
January 1, |
|
|
April 3, |
|
|
|
2010 |
|
|
2009 |
|
|
|
As Adjusted |
|
|
|
(In millions) |
|
Equity component |
|
$ |
586 |
|
|
$ |
586 |
|
|
|
|
|
|
|
|
Principal amount |
|
$ |
2,100 |
|
|
$ |
2,100 |
|
Unamortized discount |
|
|
(256 |
) |
|
|
(334 |
) |
|
|
|
|
|
|
|
Liability component |
|
$ |
1,844 |
|
|
$ |
1,766 |
|
|
|
|
|
|
|
|
The effective interest rate, contractual interest expense and amortization of debt discount
for the Senior Notes for the three and nine months ended January 1, 2010 and January 2, 2009 were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
January 1, |
|
January 2, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
|
As Adjusted |
|
|
|
|
|
As Adjusted |
|
|
|
|
|
|
($ in millions) |
|
|
|
|
Effective interest rate |
|
|
6.78 |
% |
|
|
6.78 |
% |
|
|
6.78 |
% |
|
|
6.78 |
% |
Interest expense contractual |
|
$ |
5 |
|
|
$ |
5 |
|
|
$ |
15 |
|
|
$ |
15 |
|
Interest expense amortization of debt discount |
|
$ |
26 |
|
|
$ |
24 |
|
|
$ |
77 |
|
|
$ |
72 |
|
The retrospective adoption of this guidance resulted in the following adjustments to our
Condensed Consolidated Balance Sheet as of April 3, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of April 3, 2009 |
|
|
|
As Previously |
|
|
|
|
|
|
As |
|
|
|
Reported |
|
|
Adjustments |
|
|
Adjusted |
|
|
|
(In millions) |
|
Current assets |
|
$ |
3,301 |
|
|
$ |
(4 |
)(1) |
|
$ |
3,297 |
|
Property and equipment, net |
|
|
973 |
|
|
|
|
|
|
|
973 |
|
Intangible assets, net |
|
|
1,639 |
|
|
|
|
|
|
|
1,639 |
|
Goodwill |
|
|
4,561 |
|
|
|
|
|
|
|
4,561 |
|
Investment in joint venture |
|
|
97 |
|
|
|
|
|
|
|
97 |
|
Other long-term assets |
|
|
75 |
|
|
|
(4 |
)(2) |
|
|
71 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
10,646 |
|
|
$ |
(8 |
) |
|
$ |
10,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
3,513 |
|
|
$ |
|
|
|
$ |
3,513 |
|
Convertible senior notes |
|
|
2,100 |
|
|
|
(334 |
)(3) |
|
|
1,766 |
|
Long-term deferred revenue |
|
|
419 |
|
|
|
|
|
|
|
419 |
|
Long-term deferred tax liabilities |
|
|
54 |
|
|
|
127 |
(4) |
|
|
181 |
|
Long-term income taxes payable |
|
|
522 |
|
|
|
|
|
|
|
522 |
|
Other long-term liabilities |
|
|
90 |
|
|
|
|
|
|
|
90 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
6,698 |
|
|
|
(207 |
) |
|
|
6,491 |
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
8 |
|
|
|
|
|
|
|
8 |
|
Additional paid-in capital |
|
|
8,941 |
|
|
|
348 |
(5) |
|
|
9,289 |
|
Accumulated other comprehensive income |
|
|
186 |
|
|
|
|
|
|
|
186 |
|
Accumulated deficit |
|
|
(5,187 |
) |
|
|
(149 |
)(6) |
|
|
(5,336 |
) |
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
3,948 |
|
|
|
199 |
|
|
|
4,147 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
10,646 |
|
|
$ |
(8 |
) |
|
$ |
10,638 |
|
|
|
|
|
|
|
|
|
|
|
11
The retrospective adoption of this guidance resulted in the following adjustments to our
Condensed Consolidated Statements of Operations for the three and nine months ended January 2,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended January 2, 2009 |
|
|
|
As Previously |
|
|
|
|
|
|
As |
|
|
|
Reported |
|
|
Adjustments |
|
|
Adjusted |
|
|
|
(In millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue |
|
$ |
1,514 |
|
|
$ |
|
|
|
$ |
1,514 |
|
Costs and expenses |
|
|
8,287 |
|
|
|
|
|
|
|
8,287 |
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(6,773 |
) |
|
|
|
|
|
|
(6,773 |
) |
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
5 |
|
|
|
|
|
|
|
5 |
|
Interest expense |
|
|
(7 |
) |
|
|
(24 |
)(7) |
|
|
(31 |
) |
Other income, net |
|
|
17 |
|
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes and loss from joint venture |
|
|
(6,758 |
) |
|
|
(24 |
) |
|
|
(6,782 |
) |
Provision for income taxes |
|
|
32 |
|
|
|
(10 |
)(8) |
|
|
22 |
|
Loss from joint venture |
|
|
16 |
|
|
|
|
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(6,806 |
) |
|
$ |
(14 |
) |
|
$ |
(6,820 |
) |
|
|
|
|
|
|
|
|
|
|
Net loss per share basic |
|
$ |
(8.23 |
) |
|
$ |
(0.02 |
) |
|
$ |
(8.25 |
) |
Net loss per share diluted |
|
$ |
(8.23 |
) |
|
$ |
(0.02 |
) |
|
$ |
(8.25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended January 2, 2009 |
|
|
|
As Previously |
|
|
|
|
|
|
As |
|
|
|
Reported |
|
|
Adjustments |
|
|
Adjusted |
|
|
|
(In millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue |
|
$ |
4,682 |
|
|
$ |
|
|
|
$ |
4,682 |
|
Costs and expenses |
|
|
10,960 |
|
|
|
|
|
|
|
10,960 |
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(6,278 |
) |
|
|
|
|
|
|
(6,278 |
) |
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
35 |
|
|
|
|
|
|
|
35 |
|
Interest expense |
|
|
(23 |
) |
|
|
(71 |
)(7) |
|
|
(94 |
) |
Other income, net |
|
|
8 |
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes and loss from joint venture |
|
|
(6,258 |
) |
|
|
(71 |
) |
|
|
(6,329 |
) |
Provision for income taxes |
|
|
189 |
|
|
|
(29 |
)(8) |
|
|
160 |
|
Loss from joint venture |
|
|
33 |
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(6,480 |
) |
|
$ |
(42 |
) |
|
$ |
(6,522 |
) |
|
|
|
|
|
|
|
|
|
|
Net loss per share basic |
|
$ |
(7.76 |
) |
|
$ |
(0.05 |
) |
|
$ |
(7.81 |
) |
Net loss per share diluted |
|
$ |
(7.76 |
) |
|
$ |
(0.05 |
) |
|
$ |
(7.81 |
) |
|
|
|
(1) |
|
This amount represents the cumulative adjustments to the current portion of the debt issuance costs
associated with the Senior Notes. |
|
(2) |
|
This amount represents the cumulative adjustments to the long-term portion of the debt issuance costs
associated with the Senior Notes. |
|
(3) |
|
This amount represents the remaining unamortized debt discount on the Senior Notes. |
|
(4) |
|
This amount represents the long-term deferred income tax impact of the reduction in the book basis,
with no corresponding reduction in the tax basis, of the Senior Notes. |
|
(5) |
|
This amount represents the equity component of the Senior Notes, net of tax adjustments to the tax
benefit of call options, due to the amortization of the debt discount. |
|
(6) |
|
This amount represents the cumulative Net income impact of the amortization of the debt discount,
recognized as additional non-cash interest expense, and the associated tax adjustments since inception of the Senior
Notes. |
|
(7) |
|
These amounts represent the amortization of the debt discount, recognized as additional non-cash
interest expense, net of the decrease in interest expense associated with the debt issuance costs. |
|
(8) |
|
These amounts represent the tax effect of the amortization of the debt discount and debt issuance
costs. |
12
The retrospective adoption of this guidance does not affect our balance of Cash and cash
equivalents and as a result did not change net cash flows from operating, investing or financing
activities in our Condensed Consolidated Statement of Cash Flows for the nine months ended January
2, 2009.
The retrospective adoption of this guidance resulted in the following adjustments to our
Condensed Consolidated Statements of Stockholders Equity:
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Accumulated |
|
|
|
Paid-In |
|
|
(Deficit) |
|
|
|
Capital |
|
|
Earnings |
|
|
|
(In millions) |
|
Balances, March 30, 2007, as reported |
|
$ |
10,061 |
|
|
$ |
1,348 |
|
Equity component of Senior Notes, net of taxes |
|
|
357 |
|
|
|
|
|
Equity component of debt issuance costs |
|
|
(9 |
) |
|
|
|
|
Amortization of debt discount |
|
|
|
|
|
|
(64 |
) |
Amortization of debt issuance costs, net of
reversal of previously recorded amortization
of debt issuance costs |
|
|
|
|
|
|
1 |
|
Tax adjustments |
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
Balances, March 30, 2007, as adjusted |
|
|
10,409 |
|
|
|
1,310 |
|
Fiscal 2008 equity activity, as reported |
|
|
(922 |
) |
|
|
317 |
|
Amortization of debt discount |
|
|
|
|
|
|
(91 |
) |
Amortization of debt issuance costs, net of
reversal of previously recorded amortization
of debt issuance costs |
|
|
|
|
|
|
2 |
|
Tax adjustments |
|
|
|
|
|
|
36 |
|
|
|
|
|
|
|
|
Balances, March 28, 2008, as adjusted |
|
|
9,487 |
|
|
|
1,574 |
|
Fiscal 2009 equity activity, as reported |
|
|
(198 |
) |
|
|
(6,853 |
) |
Amortization of debt discount |
|
|
|
|
|
|
(97 |
) |
Amortization of debt issuance costs, net of
reversal of previously recorded amortization
of debt issuance costs |
|
|
|
|
|
|
2 |
|
Tax adjustments |
|
|
|
|
|
|
38 |
|
|
|
|
|
|
|
|
Balances, April 3, 2009, as adjusted |
|
$ |
9,289 |
|
|
$ |
(5,336 |
) |
|
|
|
|
|
|
|
Upon adoption of this guidance and effective as of the issuance date of the Senior Notes, we
recorded, as adjustments to additional paid-in capital, deferred taxes for the differences between
the carrying value and tax basis that resulted from allocating $586 million of the principal amount
of the Senior Notes and $9 million of the associated issuance costs to equity. In subsequent
periods, we recorded adjustments to deferred taxes to reflect the tax effect of the amortization of
the debt discount and debt issuance costs.
Note 5. Goodwill and Intangible Assets
Goodwill
Goodwill is allocated by operating segment as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security and |
|
|
Storage and Server |
|
|
|
|
|
|
|
|
|
Consumer |
|
|
Compliance |
|
|
Management |
|
|
Services |
|
|
Total |
|
|
|
(In millions) |
|
Balance as of April 3, 2009 |
|
$ |
356 |
|
|
$ |
1,355 |
|
|
$ |
2,457 |
|
|
$ |
393 |
|
|
$ |
4,561 |
|
Operating
segment reclassification
(1) (3) |
|
|
|
|
|
|
193 |
|
|
|
191 |
|
|
|
(384 |
) |
|
|
|
|
Goodwill acquired through business combination |
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
14 |
|
Goodwill adjustments (2) |
|
|
10 |
|
|
|
11 |
|
|
|
|
|
|
|
10 |
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2010 |
|
$ |
366 |
|
|
$ |
1,573 |
|
|
$ |
2,648 |
|
|
$ |
19 |
|
|
$ |
4,606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
During the first quarter of fiscal 2010, we modified our
segment reporting structure to more readily match our
operating structure. Refer to Note 10 for further
discussion on segment information. |
|
(2) |
|
Adjustments made to goodwill reflect the finalization of
purchase price, foreign currency exchange rate, and tax
adjustments related to prior acquisitions that were
accounted for under the prior authoritative guidance on
business combinations. |
|
(3) |
|
During the period ended January 1, 2010, we revised
an allocation of goodwill related to the Services, Security & Compliance and
the Storage and Server Management segments as a result of the modification
of our segment reporting structure that we completed in the first quarter of
fiscal 2010. See Note 10 for further information. This revised allocation was to
appropriately classify the Software-as-a-Service reporting units goodwill into the
Security and Compliance and the Storage and Server Management
segments, and the Enterprise Vault
products goodwill into the Storage and Server Management segment. This revision is
effective as of July 3, 2009. The result of this reallocation was to increase goodwill
by $90 million in the Security and Compliance segment, increase goodwill by $189
million in the Storage and Server Management segment and decrease goodwill by $279 million
in the Services segment. |
We apply a fair value based impairment test to the carrying value of goodwill and
indefinite-lived intangible assets on an annual basis on the first day of the fourth quarter of
each fiscal year or earlier if indicators of impairment exist. As of January 1, 2010, no
indicators of impairment were identified.
13
Intangible assets, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2010 |
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|
Remaining |
|
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Useful Life |
|
|
|
(In millions) |
|
Customer relationships |
|
$ |
1,841 |
|
|
$ |
(919 |
) |
|
$ |
922 |
|
|
4 years |
Developed technology |
|
|
1,779 |
|
|
|
(1,562 |
) |
|
|
217 |
|
|
1 year |
Definite-lived tradenames |
|
|
130 |
|
|
|
(66 |
) |
|
|
64 |
|
|
5 years |
Patents |
|
|
76 |
|
|
|
(52 |
) |
|
|
24 |
|
|
3 years |
Indefinite-lived tradenames |
|
|
55 |
|
|
|
|
|
|
|
55 |
|
|
Indefinite |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,881 |
|
|
$ |
(2,599 |
) |
|
$ |
1,282 |
|
|
3 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of April 3, 2009 |
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|
Remaining |
|
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Useful Life |
|
|
|
(In millions) |
|
Customer relationships |
|
$ |
1,830 |
|
|
$ |
(745 |
) |
|
$ |
1,085 |
|
|
5 years |
Developed technology |
|
|
1,785 |
|
|
|
(1,390 |
) |
|
|
395 |
|
|
1 year |
Definite-lived tradenames |
|
|
130 |
|
|
|
(54 |
) |
|
|
76 |
|
|
6 years |
Patents |
|
|
76 |
|
|
|
(46 |
) |
|
|
30 |
|
|
4 years |
Indefinite-lived tradenames |
|
|
53 |
|
|
|
|
|
|
|
53 |
|
|
Indefinite |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,874 |
|
|
$ |
(2,235 |
) |
|
$ |
1,639 |
|
|
3 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the three months ended January 1, 2010 and January 2, 2009, total amortization expense
for intangible assets was $105 million and $150 million, respectively. During the nine months
ended January 1, 2010 and January 2, 2009, total amortization expense for intangible assets was
$375 million and $433 million, respectively.
Total future amortization expense for intangible assets that have definite lives, based on our
existing intangible assets and their current estimated useful lives as of January 1, 2010, is
estimated as follows (in millions):
|
|
|
|
|
Remainder of fiscal 2010 |
|
$ |
105 |
|
2011 |
|
|
339 |
|
2012 |
|
|
296 |
|
2013 |
|
|
263 |
|
2014 |
|
|
119 |
|
Thereafter |
|
|
105 |
|
|
|
|
|
Total |
|
$ |
1,227 |
|
|
|
|
|
Note 6. Investment in Joint Venture
On February 5, 2008, Symantec formed Huawei-Symantec, Inc. (joint venture) with a subsidiary
of Huawei Technologies Co., Ltd. (Huawei). The joint venture is domiciled in Hong Kong with
principal operations in Chengdu, China. We account for our investment in the joint venture under
the equity method of accounting. Under this method, we record our proportionate share of the joint
ventures net income or loss based on the quarterly financial statements of the joint venture. We
record our proportionate share of net income or loss one quarter in arrears. For the three and
nine months ended January 1, 2010, we recorded a loss of $12 million and $37 million, respectively,
related to our share of the joint ventures net loss, including the amortization of the basis
difference, for the joint ventures period ended September 30, 2009. This loss is included in Loss
from joint venture. The carrying value of our investment in the joint venture as of January 1, 2010
was $60 million.
In
October 2009, the FASB issued new authoritative literature that provides guidance on
determining multiple elements in an arrangement and how total consideration should be allocated
amongst the elements. It also expands disclosure requirements for multiple-element arrangements.
Concurrently, the FASB also issued new authoritative literature for arrangements that include both
software and tangible products. This guidance excludes tangible products and certain related elements from
the scope of the revenue recognition authoritative guidance specific to software transactions. The
standards must both be adopted in the same period and can be applied on a prospective basis for
revenue arrangements entered into or materially modified in fiscal years beginning on or after June
15, 2010, with earlier application permitted, or they can be adopted on a retrospective basis.
The
joint venture adopted new authoritative guidance on revenue arrangements with multiple
deliverables during its period ended December 31, 2009, which was applied to the beginning of its
fiscal year. The expected impact of adopting the new authoritative
14
guidance on the joint ventures financial statements will be a decrease in its net loss of
approximately $21 million to $24 million for its fiscal year ended December 31, 2009. We expect to
include our proportionate share of the decrease in net loss of approximately $10 million to $12
million in our Annual Report on Form 10-K for our fiscal year ending April 2, 2010. Approximately
$1 million to $2 million of the decrease in net loss will impact our fiscal fourth quarter.
Note 7. Restructuring
Our restructuring costs and liabilities consist of severance, benefits, facilities and other
costs. Severance and benefits generally include severance, stay-put or one-time bonuses,
outplacement services, health insurance coverage, effects of foreign currency exchange and legal
costs. Facilities costs generally include rent expense, less expected sublease income and lease
termination costs. Other costs generally include relocation, asset abandonment costs, the effects
of foreign currency exchange and consulting services. Also included in Restructuring in our
Condensed Consolidated Statements of Operations are transition and transformation fees, consulting
charges, and other costs related to the outsourcing of back office functions. Restructuring
expenses generally do not impact a particular reporting segment and are included in the Other
reporting segment.
Charges for restructuring costs were $5 million and $47 million for the three months ended
January 1, 2010 and January 2, 2009, respectively, and $64 million and $73 million for the nine
months ended January 1, 2010 and January 2, 2009, respectively. These amounts include Transition,
transformation, and related other costs of $1 million and $24 million for the three and nine months
ended January 1, 2010, respectively. There were no Transition, transformation, and related other
costs in the prior year. Transition and transformation related activities are expected to be
substantially completed by the end of the second quarter in fiscal 2011. Total remaining costs for
transition and transformation activities are estimated to be approximately $20 million to $25
million.
2009 Restructuring Plan (2009 Plan)
In the third quarter of fiscal 2009, management approved and initiated the following
restructuring events to:
|
|
|
Reduce operating costs through a worldwide headcount reduction. This action was
initiated in fiscal 2009 and was substantially completed in fiscal 2010. |
|
|
|
|
Corporate headquarters relocation. This action was initiated and substantially completed in
fiscal 2010. This includes the cost of relocating our employees to the
new headquarters. The loss on the sale of our previous headquarters is
recorded in our Condensed Consolidated Statement of Operations in the
line entitled Loss and impairment of assets held for sale. |
2008 Restructuring Plan (2008 Plan)
In the third quarter of fiscal 2008, management approved and initiated the following
restructuring events to:
|
|
|
Reduce operating costs through a worldwide headcount reduction. This action was
initiated and substantially completed in fiscal 2008. |
|
|
|
|
Reduce operating costs, implement management structure changes, optimize the business
structure and discontinue certain products. Charges related to these actions are for
severance and benefits. These actions were initiated in the third quarter of fiscal 2008
and are expected to be substantially completed by the end of the second quarter in fiscal
2011. Total remaining costs for this component are estimated to range from $10 million to
$20 million. |
|
|
|
|
Outsource certain back office functions worldwide. Charges related to these actions are
primarily for severance and benefits. These actions were initiated in the beginning of
fiscal 2009 and are expected to be substantially completed by the end of the second quarter
in fiscal 2011. Total remaining costs for severance and benefits are expected to range from
$5 million to $10 million. |
Acquisition-Related Restructuring Plans
As a result of business acquisitions, management may deem certain job functions to be
redundant and facilities to be in excess either at the time of acquisition or for a period of time
after the acquisition in conjunction with our integration efforts. For acquisitions made prior to
fiscal 2010, such restructuring-related costs have generally been adjusted to goodwill to reflect
changes in the purchase price of the respective acquisition. With the adoption of new
authoritative guidance on business combinations, restructuring charges related to our business
acquisitions starting in fiscal 2010 will be expensed in our Condensed Consolidated Statements of
Operations. As of January 1, 2010, acquisition-related restructuring liabilities, primarily
related to excess facility obligations at several locations around the world, are expected to be
paid between fiscal 2010 and fiscal 2018 when their respective lease terms end.
15
Restructuring Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring Liability |
|
|
|
|
|
|
|
Costs, |
|
|
|
|
|
|
|
|
|
|
Cumulative |
|
|
|
April 3, |
|
|
Net of |
|
|
Cash |
|
|
January 1, |
|
|
Incurred to |
|
|
|
2009 |
|
|
Adjustments(1) |
|
|
Payments |
|
|
2010 |
|
|
Date |
|
|
|
(In millions) |
|
2009 Restructuring Plan: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance |
|
$ |
3 |
|
|
$ |
1 |
|
|
$ |
(3 |
) |
|
$ |
1 |
|
|
$ |
41 |
|
2008 Restructuring Plan: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance |
|
|
7 |
|
|
|
30 |
|
|
|
(32 |
) |
|
|
5 |
|
|
|
94 |
|
Acquisition-related Restructuring Plans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance |
|
|
1 |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
1 |
|
|
|
2 |
|
Facilities |
|
|
16 |
|
|
|
8 |
|
|
|
(10 |
) |
|
|
14 |
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
27 |
|
|
$ |
40 |
|
|
$ |
(46 |
) |
|
$ |
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transition, transformation and other costs |
|
|
|
|
|
|
24 |
|
|
|
|
|
|
|
|
|
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Restructuring Charges |
|
|
|
|
|
$ |
64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities |
|
$ |
21 |
|
|
|
|
|
|
|
|
|
|
$ |
10 |
|
|
|
|
|
Other long-term liabilities |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
27 |
|
|
|
|
|
|
|
|
|
|
$ |
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Total net adjustments or reversals were not material for the nine months of fiscal 2010. |
Note 8. Litigation
For a discussion of our pending tax litigation with the Internal Revenue Service relating to
the 2000 and 2001 tax years of Veritas, see Note 12.
On July 7, 2004, a purported class action complaint entitled Paul Kuck, et al. v. Veritas
Software Corporation, et al. was filed in the United States District Court for the District of
Delaware. The lawsuit alleges violations of federal securities laws in connection with Veritas
announcement on July 6, 2004 that it expected results of operations for the fiscal quarter ended
June 30, 2004 to fall below earlier estimates. The complaint generally seeks an unspecified amount
of damages. Subsequently, additional purported class action complaints have been filed in Delaware
federal court, and, on March 3, 2005, the Court entered an order consolidating these actions and
appointing lead plaintiffs and counsel. A consolidated amended complaint (CAC), was filed on May
27, 2005, expanding the class period from April 23, 2004 through July 6, 2004. The CAC also named
another officer as a defendant and added allegations that Veritas and the named officers made false
or misleading statements in press releases and SEC filings regarding the companys financial
results, which allegedly contained revenue recognized from contracts that were unsigned or lacked
essential terms. The defendants to this matter filed a motion to dismiss the CAC in July 2005; the
motion was denied in May 2006. In April 2008, the parties filed a stipulation of settlement. On
July 31, 2008, the Court held a final approval hearing and, on August 5, 2008, the Court entered an
order approving the settlement. An objector to the fees portion of the settlement has lodged an
appeal. In fiscal 2008, we recorded an accrual in the amount of $21.5 million for this matter and,
pursuant to the terms of the settlement, we established a settlement fund of $21.5 million on May
1, 2008.
We are also involved in a number of other judicial and administrative proceedings that are
incidental to our business. Although adverse decisions (or settlements) may occur in one or more
of the cases, it is not possible to estimate the possible loss or losses from each of these cases.
The final resolution of these lawsuits, individually or in the aggregate, is not expected to have a
material adverse effect on our financial condition or results of operations.
Note 9. Stock Repurchases
The following table summarizes our stock repurchases:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, 2010 |
|
January 1, 2010 |
|
|
(In millions, except per share data) |
Total number of shares repurchased |
|
|
7 |
|
|
|
23 |
|
Dollar amount of shares repurchased |
|
$ |
121 |
|
|
$ |
364 |
|
Average price paid per share |
|
$ |
17.76 |
|
|
$ |
16.12 |
|
Range of price paid per share |
|
$ |
17.27 to 18.29 |
|
|
$ |
14.14 to 18.29 |
|
We have had stock repurchase programs in effect since fiscal 2001 and have repurchased shares
on a quarterly basis since the fourth quarter of fiscal 2004. Our current program was authorized
by our Board of Directors on October 27, 2009 to repurchase up to
16
$1 billion of our common stock. This program does not have an expiration date, and as of January
1, 2010, $936 million remained authorized for future repurchases.
Note 10. Segment Information
During the first quarter of fiscal 2010, we modified our segment reporting structure to more
readily match our operating structure. The following modifications were made to our segment
reporting structure: (i) Enterprise Vault products moved to the Storage and Server Management
segment from the Security and Compliance segment; and (ii) Software-as-a-Service (SaaS) offerings
moved to either the Security and Compliance segment or the Storage and Server Management segment
from the Services segment, based on the nature of the service delivered. There were no changes to
the Consumer or Other segments. The new reporting structure more directly aligns the operating
segments with our markets and customers, and we believe it will establish more direct lines of
reporting responsibilities, expedite decision making, and enhance the ability to pursue product
integration and strategic growth opportunities. Data shown from the prior periods has been
reclassified to match the current reporting structure. As of January 1, 2010, our five operating
segments are:
|
|
|
Consumer. Our Consumer segment focuses on delivering our Internet security, PC tune-up,
and backup products to individual users and home offices. |
|
|
|
|
Security and Compliance. Our Security and Compliance segment focuses on providing large,
medium, and small-sized businesses with solutions for endpoint security and management,
compliance, messaging management, and data loss prevention solutions. These products allow
our customers to secure, provision, and remotely access their laptops, PCs, mobile devices,
and servers. We also provide our customers with services delivered through our SaaS
security offerings. |
|
|
|
|
Storage and Server Management. Our Storage and Server Management segment focuses on
providing large, medium and small-sized businesses with storage and server management,
backup, archiving, and data protection solutions across heterogeneous storage and server
platforms, as well as services delivered through our SaaS offerings. |
|
|
|
|
Services. Our Services segment provides customers with implementation services and
solutions designed to assist them in maximizing the value of their Symantec software. Our
offerings include consulting, business critical services, education, and managed security
services. |
|
|
|
|
Other. Our Other segment is comprised of sunset products and products nearing the end of
their life cycle. It also includes general and administrative expenses; amortization of
acquired product rights, other intangible assets, and other assets; goodwill impairment
charges; charges such as stock-based compensation and restructuring; and certain indirect
costs that are not charged to the other operating segments. |
Our reportable segments are the same as our operating segments. The accounting policies of
the segments are described in our Annual Report on Form 10-K for the fiscal year ended April 3,
2009 and have not changed as of January 1, 2010. There were no intersegment sales for the three
and nine months ended January 1, 2010.
17
Segment information
The following table summarizes our operating segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Storage and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security and |
|
Server |
|
|
|
|
|
|
|
|
|
Total |
|
|
Consumer |
|
Compliance |
|
Management |
|
Services |
|
Other |
|
Company |
|
|
($ in millions) |
Three months ended January 1, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
$ |
478 |
|
|
$ |
369 |
|
|
$ |
594 |
|
|
$ |
107 |
|
|
$ |
|
|
|
$ |
1,548 |
|
Percentage of total net revenue |
|
|
31 |
% |
|
|
24 |
% |
|
|
38 |
% |
|
|
7 |
% |
|
|
0 |
% |
|
|
100 |
% |
Operating income (loss) |
|
|
206 |
|
|
|
104 |
|
|
|
289 |
|
|
|
11 |
|
|
|
(333 |
) |
|
|
277 |
|
Operating margin of segment |
|
|
43 |
% |
|
|
28 |
% |
|
|
49 |
% |
|
|
10 |
% |
|
|
* |
|
|
|
|
|
Three months ended January 2, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
$ |
432 |
|
|
$ |
354 |
|
|
$ |
621 |
|
|
$ |
107 |
|
|
$ |
|
|
|
$ |
1,514 |
|
Percentage of total net revenue |
|
|
29 |
% |
|
|
23 |
% |
|
|
41 |
% |
|
|
7 |
% |
|
|
0 |
% |
|
|
100 |
% |
Operating income (loss) |
|
|
224 |
|
|
|
119 |
|
|
|
283 |
|
|
|
15 |
|
|
|
(7,414 |
) |
|
|
(6,773 |
) |
Operating margin of segment |
|
|
52 |
% |
|
|
34 |
% |
|
|
46 |
% |
|
|
14 |
% |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended January 1, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
$ |
1,388 |
|
|
$ |
1,050 |
|
|
$ |
1,710 |
|
|
$ |
306 |
|
|
$ |
|
|
|
$ |
4,454 |
|
Percentage of total net revenue |
|
|
31 |
% |
|
|
24 |
% |
|
|
38 |
% |
|
|
7 |
% |
|
|
0 |
% |
|
|
100 |
% |
Operating income (loss) |
|
|
645 |
|
|
|
271 |
|
|
|
825 |
|
|
|
30 |
|
|
|
(1,085 |
) |
|
|
686 |
|
Operating margin of segment |
|
|
46 |
% |
|
|
26 |
% |
|
|
48 |
% |
|
|
10 |
% |
|
|
* |
|
|
|
|
|
Nine months ended January 2, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
$ |
1,341 |
|
|
$ |
1,102 |
|
|
$ |
1,907 |
|
|
$ |
331 |
|
|
$ |
1 |
|
|
$ |
4,682 |
|
Percentage of total net revenue |
|
|
29 |
% |
|
|
23 |
% |
|
|
41 |
% |
|
|
7 |
% |
|
|
0 |
% |
|
|
100 |
% |
Operating income (loss) |
|
|
734 |
|
|
|
335 |
|
|
|
816 |
|
|
|
22 |
|
|
|
(8,185 |
) |
|
|
(6,278 |
) |
Operating margin of segment |
|
|
55 |
% |
|
|
30 |
% |
|
|
43 |
% |
|
|
7 |
% |
|
|
* |
|
|
|
|
|
|
|
|
* |
|
Percentage not meaningful |
Note 11. Stock-based Compensation
The following table summarizes the total stock-based compensation expense recognized in our
Condensed Consolidated Statements of Operations for the following periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
January 1, |
|
|
January 2, |
|
|
January 1, |
|
|
January 2, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(In millions, except per share data) |
|
Cost of revenue Content, subscriptions, and maintenance |
|
$ |
4 |
|
|
$ |
2 |
|
|
$ |
11 |
|
|
$ |
9 |
|
Cost of revenue Licenses |
|
|
|
|
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
Sales and marketing |
|
|
16 |
|
|
|
15 |
|
|
|
48 |
|
|
|
52 |
|
Research and development |
|
|
13 |
|
|
|
11 |
|
|
|
42 |
|
|
|
38 |
|
General and administrative |
|
|
6 |
|
|
|
5 |
|
|
|
21 |
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense |
|
|
39 |
|
|
|
34 |
|
|
|
124 |
|
|
|
123 |
|
Tax benefit associated with stock-based compensation expense |
|
|
10 |
|
|
|
9 |
|
|
|
33 |
|
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of stock-based compensation expense on operations |
|
$ |
29 |
|
|
$ |
25 |
|
|
$ |
91 |
|
|
$ |
89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of stock-based compensation expense on earnings per
share basic |
|
$ |
0.04 |
|
|
$ |
0.03 |
|
|
$ |
0.11 |
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of stock-based compensation expense on earnings per
share diluted |
|
$ |
0.04 |
|
|
$ |
0.03 |
|
|
$ |
0.11 |
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2010, total unrecognized compensation expense adjusted for estimated
forfeitures related to unvested stock options and Restricted Stock Units (RSUs), was $54 million
and $147 million, respectively, which is expected to be recognized over the remaining
weighted-average vesting periods of 2 years for stock options and 3 years for RSUs.
The weighted-average fair value per stock option granted during the nine months ended January
1, 2010 and January 2, 2009 was $5.15 and $5.29, respectively. The total intrinsic value of
options exercised during the nine months ended January 1, 2010 and January 2, 2009, including
assumed options, was $48 million and $101 million, respectively.
The weighted-average fair value per RSUs granted during the nine months ended January 1, 2010
and January 2, 2009 was $15.45 and $19.67, respectively. The fair value of RSUs granted for the
nine months ended January 1, 2010 and January 2, 2009, was
18
$155 million and $186 million, respectively. The total fair value of RSUs that vested during the
nine months ended January 1, 2010 and January 2, 2009, including assumed RSUs, was $68 million and
$50 million, respectively.
During the nine months ended January 1, 2010, we granted 93,992 Restricted Stock Awards
(RSAs) to members of our board of directors. Each RSA had a fair value of $15.32 and vested
immediately upon grant. As a result, we recorded $1 million of stock-based compensation expense
for these RSAs during the nine months ended January 1, 2010.
Note 12. Income Taxes
The effective tax rate was approximately (8)% and (0.3)% for the three months ended January 1,
2010 and January 2, 2009, respectively, and 13% and (3)% for the nine months ended January 1, 2010
and January 2, 2009, respectively.
The tax expense for the three and nine months ended January 1, 2010 was significantly reduced
by the following benefits recognized in the third quarter of fiscal 2010: (1) $78.5 million tax
benefit arising from the Veritas v. Commissioner Tax Court decision (see further discussion below),
(2) $9 million tax benefit from the reduction of our valuation allowance for certain deferred tax
assets, and (3) $5 million benefit to adjust taxes provided in prior periods. The change in the
valuation allowance follows discussions with Irish Revenue in the quarter, the result of which
accelerates the timing of the use of certain Irish tax loss carryforwards in the future. The tax
expense for the nine months ended January 1, 2010 is otherwise increased by a $7 million tax
expense recognized in the first quarter of fiscal 2010 as a result of the May 2009 Ninth Circuit
Court of Appeals decision in Xilinx v. Commissioner (see further discussion below). The tax
expense for the three and nine months ended January 2, 2009 was materially impacted by the
inclusion of a $44 million tax benefit associated with the $7.0 billion impairment of goodwill in
the third quarter of fiscal 2009.
The provision for the three and nine months ended January 1, 2010 otherwise reflects a
forecast tax rate of 31%. The provision for the three and nine months ended January 2, 2009
otherwise reflected a forecast tax rate of 35%. The forecast tax rates for all periods presented
reflect the benefits of lower-taxed foreign earnings, domestic manufacturing incentives, and
research and development credits, partially offset by state income taxes and non-deductible stock
based compensation. The forecast tax rate in fiscal 2010 is lower than in fiscal 2009 primarily
due to higher benefits from low-taxed foreign earnings.
On May 27, 2009, the U.S. Court of Appeals for the Ninth Circuit overturned a 2005 U.S. Tax
Court ruling in Xilinx v. Commissioner, holding that stock-based compensation related to research
and development (R&D) must be shared by the participants of a R&D cost sharing arrangement. The
Ninth Circuit held that related parties to such an arrangement must share stock option costs,
notwithstanding the U.S. Tax Courts finding that unrelated parties in such an arrangement would
not share such costs. Symantec has a similar R&D cost sharing arrangement in place. The Ninth
Circuits reversal of the U.S. Tax Courts decision changes our estimate of stock option related
tax benefits previously recognized under the authoritative guidance on income taxes. As a result
of the Ninth Circuits ruling, we increased our liability for unrecognized tax benefits, recording
a tax expense of approximately $7 million and a reduction of additional paid-in capital of
approximately $30 million in the first quarter of fiscal 2010. On January 13, 2010, the Ninth
Circuit Court of Appeals withdrew its issued opinion. We will monitor any further actions by the
Ninth Circuit over the balance of the fourth quarter of fiscal 2010 in assessing the need to adjust
our liability for unrecognized tax benefits. Accordingly, we believe that there is a reasonable
possibility of a $37 million change to our total unrecognized tax benefits within the next twelve
months.
On March 29, 2006, we received a Notice of Deficiency from the IRS claiming that we owe $867
million of additional taxes, excluding interest and penalties, for the 2000 and 2001 tax years
based on an audit of Veritas. On June 26, 2006, we filed a petition with the U.S. Tax Court
protesting the IRS claim for such additional taxes. In the fourth quarter of fiscal 2007, we
agreed to pay $7 million out of $35 million originally assessed by the IRS in connection with
several of the lesser issues covered in the assessment. The IRS agreed to waive the assessment of
penalties. During July 2008, we completed the trial phase of the Tax Court case, which dealt with
the remaining issue covered in the assessment. At trial, the IRS changed its position with respect
to this remaining issue, which decreased the remaining amount at issue from $832 million to $545
million, excluding interest. We filed our post-trial briefs in October 2008 and rebuttal briefs in
November 2008 with the U.S. Tax Court.
On December 10, 2009, the U.S. Tax Court issued its opinion, finding that our transfer pricing
methodology, with appropriate adjustments, was the best method for assessing the value of the
transaction at issue between Veritas and its offshore subsidiary. The Tax Court judge provided
guidance as to how adjustments would be made to correct the application of the method used by
Veritas. We remeasured and decreased our liability for unrecognized tax benefits accordingly,
resulting in a $78.5 million tax benefit in the third quarter in fiscal 2010. Final computations
as directed by the Ruling are not complete and, accordingly, we may make further adjustments to our
tax liability in the future. The Tax Court ruling is subject to appeal. We have $110 million on
deposit with the IRS pertaining to this matter. We do not anticipate making any further federal
tax payments for these years.
19
On December 2, 2009, we received a Revenue Agents Report from the IRS for the Veritas 2002
through 2005 tax years assessing additional taxes due. We agree with $30 million of the tax
assessment, excluding interest, but will contest the other $80 million of tax assessed and all
penalties. The unagreed issues concern transfer pricing matters comparable to the one that was
resolved in our favor in the Veritas v. Commissioner Tax Court decision. On January 15, 2010, we
filed a protest with the IRS in connection with the $80 million of tax assessed.
We continue to monitor the progress of ongoing tax controversies and the impact, if any, of
the expected tolling of the statute of limitations in various taxing jurisdictions.
Note 13. Earnings per Share
The components of earnings per share are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
January 1, |
|
|
January 2, |
|
|
January 1, |
|
|
January 2, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(In millions, except per share data) |
|
Net income (loss) per share basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
300 |
|
|
$ |
(6,820 |
) |
|
$ |
523 |
|
|
$ |
(6,522 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share basic |
|
$ |
0.37 |
|
|
$ |
(8.25 |
) |
|
$ |
0.64 |
|
|
$ |
(7.81 |
) |
Weighted average outstanding common shares |
|
|
809 |
|
|
|
827 |
|
|
|
812 |
|
|
|
835 |
|
Net income (loss) per share diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
300 |
|
|
$ |
(6.820 |
) |
|
$ |
523 |
|
|
$ |
(6,522 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share diluted |
|
$ |
0.37 |
|
|
$ |
(8.25 |
) |
|
$ |
0.64 |
|
|
$ |
(7.81 |
) |
Weighted average outstanding common shares |
|
|
809 |
|
|
|
827 |
|
|
|
812 |
|
|
|
835 |
|
Shares issuable from assumed exercise of options |
|
|
7 |
|
|
|
|
|
|
|
7 |
|
|
|
|
|
Dilutive impact of restricted stock and restricted stock units |
|
|
3 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total weighted-average shares outstanding diluted |
|
|
819 |
|
|
|
827 |
|
|
|
822 |
|
|
|
835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We excluded 46 million and 70 million weighted-average stock options for the three months
ended January 1, 2010 and January 2, 2009, respectively, and 50 million and 61 million
weighted-average stock options for the nine months ended January 1, 2010 and January 2, 2009,
respectively, because their effect would have been anti-dilutive. The effect of the warrants
issued and options purchased in connection with the convertible senior notes were also excluded for
the reasons discussed in our Annual Report on Form 10-K for the fiscal year ended April 3, 2009.
20
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements and Factors That May Affect Future Results
The discussion below contains forward-looking statements, which are subject to safe harbors
under the Securities Act of 1933, as amended, or the Securities Act, and the Exchange Act.
Forward-looking statements include references to our ability to utilize our deferred tax assets, as
well as statements including words such as expects, plans, anticipates, believes,
estimates, predicts, projects, and similar expressions. In addition, statements that refer
to projections of our future financial performance, anticipated growth and trends in our businesses
and in our industries, the anticipated impacts of acquisitions, and other characterizations of
future events or circumstances are forward-looking statements. These statements are only
predictions, based on our current expectations about future events and may not prove to be
accurate. We do not undertake any obligation to update these forward-looking statements to reflect
events occurring or circumstances arising after the date of this report. These forward-looking
statements involve risks and uncertainties, and our actual results, performance, or achievements
could differ materially from those expressed or implied by the forward-looking statements on the
basis of several factors, including those that we discuss in Risk Factors, set forth in Part I,
Item 1A, of our annual report on Form 10-K for the fiscal year ended April 3, 2009. We encourage
you to read that section carefully.
Fiscal Calendar
We have a 52/53-week fiscal accounting year ending on the Friday closest to March 31. The
three months ended January 1, 2010 and January 2, 2009 both consisted of 13 weeks. The nine months
ended January 1, 2010 consisted of 39 weeks, whereas the nine months ended January 2, 2009
consisted of 40 weeks.
OVERVIEW
Our Business
Symantec is a global leader in providing security, storage and systems management solutions to
help businesses and consumers secure and manage their information. We provide customers worldwide
with software and services that protect, manage and control information risks related to security,
data protection, storage, compliance, and systems management. We help our customers manage cost,
complexity and compliance by protecting their IT infrastructure as they seek to maximize value from
their IT investments.
Our Operating Segments
Our operating segments are significant strategic business units that offer different products
and services, distinguished by customer needs. Since the March 2008 quarter, we have operated in
five operating segments: Consumer, Security and Compliance, Storage and Server Management,
Services, and Other. During the first quarter of fiscal 2010, we changed our reporting segments to
better align to our operating structure, resulting in the Enterprise Vault products that were
formerly included in the Security and Compliance segment being moved to the Storage and Server
Management segment. Also, Software-as-a-Service (SaaS) offerings moved to either the Security
and Compliance segment or the Storage and Server Management segment from the Services segment,
based on the nature of the service delivered. The predominant amount of SaaS revenue went to the
Security and Compliance segment. We revised the segment information for the prior year to conform
to the new presentation. For further descriptions of our operating segments, see Note 10 of the
Notes to Condensed Consolidated Financial Statements in this quarterly report. Our reportable
segments are the same as our operating segments.
Financial Results and Trends
Revenue increased for the three months ended January 1, 2010 and decreased for the nine months
ended January 1, 2010, in each case as compared to the same periods last year. The revenue
increase for the three months ended January 1, 2010 is largely a result of the positive impact of
foreign currency fluctuations, as described further below, as well as strong performance by our
Consumer segment. The challenging economic environment meant that corporate IT budgets have been
reduced and spending has slowed from previous levels. Smaller IT budgets have led some of our
corporate customers to purchase smaller volumes of our products, particularly in the Storage and
Server Management segment. In addition, our storage business within
the Storage and Server Management segment has been adversely
affected for the last several quarters by the deceleration of demand in the server
market, which has particularly affected new license sales of our
storage products on the Sun platform. If the economic conditions affecting global markets continue or IT
spending remains tight, we may continue to experience slower or negative revenue growth and our
business and operating results might suffer. In light of these economic conditions, we will
continue to align our cost structure with our revenue expectations. Additionally, during the three
and nine months ended January 1, 2010, we experienced significantly higher year-over-year OEM
placement fee payments resulting from an increase in PC unit shipments. These increased payments
had an adverse impact on our operating income and operating margins during the fiscal 2010 periods,
particularly for our consumer segment. We expect to see the revenue benefit from these increased
placement fees in future periods.
21
Fluctuations in the U.S. dollar compared to foreign currencies positively impacted our
international revenue by approximately $64 million for the three months ended January 1, 2010 and
negatively impacted our international revenue by approximately $25 million for the nine months
ended January 1, 2010, as compared to the same periods last year. Our operating expenses during
the three months ended January 1, 2010 were unfavorably impacted by a weaker U.S. dollar as
compared to the same period last year while operating expenses during the nine months ended January
1, 2010 were favorably impacted by a stronger U.S. dollar as compared to the same period last year.
We are unable to predict the extent to which revenue in future periods will be impacted by changes
in foreign currency exchange rates. If our level of international sales and expenses increase in
the future, changes in foreign exchange rates may have a potentially greater impact on our revenue
and operating results.
As discussed above under Fiscal Calendar, the nine months ended January 1, 2010 consisted of
39 weeks, whereas the nine months ended January 2, 2009 consisted of 40 weeks. The extra 14th week
contributed additional revenue to the July 4, 2008 quarter when compared to the July 3, 2009
quarter.
Our net income was $300 million and $523 million for the three and nine months ended January
1, 2010, respectively, as compared to our net loss of $6.8 billion and $6.5 billion for the three
and nine months ended January 2, 2009, respectively. Net income for the three and nine months
ended January 1, 2010 was positively impacted by a $78.5 million tax benefit in the third quarter
of fiscal 2010 resulting from the December 2009 decision in the U.S. Tax Court relating to the
Veritas 2000 and 2001 tax years. In addition, net income for the three and nine months ended
January 1, 2010 was impacted by $43 million and $46 million of net gain, respectively, from the
liquidation of certain foreign legal entities. Our net loss for the three and nine months ended
January 2, 2009 was largely a result of the $7.0 billion non-cash goodwill impairment charge
incurred during the third quarter of fiscal 2009.
Critical Accounting Estimates
There have been no changes in the matters for which we make critical accounting estimates in
the preparation of our condensed consolidated financial statements during the nine months ended
January 1, 2010 as compared to those disclosed in Managements Discussion and Analysis of Financial
Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year
ended April 3, 2009. While there have been no such changes, we have revised our description of the
critical accounting estimates made in the valuation of goodwill, intangible assets and long-lived
assets, as provided below.
Valuation of goodwill, intangible assets and long-lived assets
When we acquire businesses, we allocate the purchase price to tangible assets and liabilities
and identifiable intangible assets acquired. Any residual purchase price is recorded as goodwill.
The allocation of the purchase price requires management to make significant estimates in
determining the fair values of assets acquired and liabilities assumed, especially with respect to
intangible assets. These estimates are based on historical experience and information obtained
from the management of the acquired companies. These estimates can include, but are not limited
to, the cash flows that an asset is expected to generate in the future, the appropriate
weighted-average cost of capital, and the cost savings expected to be derived from acquiring an
asset. These estimates are inherently uncertain and unpredictable, and if different estimates were
used the purchase price for the acquisition could be allocated to the acquired assets differently
from the allocation that we have made. In addition, unanticipated events and circumstances may
occur which may affect the accuracy or validity of such estimates, and if such events occur we may
be required to record a charge against the value ascribed to an acquired asset.
Goodwill. We review goodwill for impairment on an annual basis on the first day of the fourth
quarter of each fiscal year, and on an interim basis whenever events or changes in circumstances
indicate that the carrying value may not be recoverable in accordance with our accounting policy.
Before performing the goodwill impairment test, we first assess the value of long-lived assets in
each reporting unit, including tangible and intangible assets. We then perform a two-step
impairment test on goodwill. In the first step, we compare the estimated fair value of each
reporting unit to its allocated carrying value (book value). If the carrying value of the
reporting unit exceeds the fair value of the equity assigned to that unit, there is an indicator of
impairment and we must perform the second step of the impairment test. This second step involves
determining the implied fair value of that reporting units goodwill in a manner similar to the
purchase price allocation for an acquired business. If the carrying value of the reporting units
goodwill exceeds its implied fair value, then we would record an impairment loss equal to the
excess. Our reporting units are consistent with our operating segments.
The process of estimating the fair value of our reporting units requires significant judgment
at many points during the analysis. Many assets and liabilities, such as accounts receivable and
property and equipment, are not specifically allocated to an individual reporting unit. In
determining the carrying value of the reporting units, we apply judgment to allocate the assets and
liabilities, and this allocation affects the carrying value of the respective reporting units.
Similarly, we use judgment to allocate goodwill to the reporting units based on relative fair
values. The use of relative fair values has been necessary for certain reporting units due to
22
changes in our operating structure in prior years. To determine a reporting units fair
value, we use the income approach under which we calculate the fair value of each reporting unit
based on the estimated discounted future cash flows of that unit. We evaluate the reasonableness
of this approach with the market approach, which involves a review of the carrying value of our
assets relative to our market capitalization and to the valuation of publicly traded companies
operating in the same or similar lines of business.
Applying the income approach requires that we make a number of important estimates and
assumptions. We estimate the future cash flows of each reporting unit based on historical and
forecasted revenue and operating costs. This, in turn, involves further estimates, such as
estimates of future growth rates and foreign exchange rates. In addition, we apply a discount rate
to the estimated future cash flows for the purpose of the valuation. This discount rate is based
on the estimated weighted-average cost of capital for each reporting unit and may change from year
to year. For example, in our valuation process in the fourth quarter of fiscal 2009 we used a
higher discount rate than in the prior year due to increased risk associated with the declining
global economic conditions. Changes in these key estimates and assumptions, or in other assumptions
used in this process, could materially affect our impairment analysis for a given year.
As of April 3, 2009, the last day of fiscal 2009, our goodwill balance was $4.6 billion.
Based on the impairment analysis performed on January 3, 2009, we determined that the fair value of
each of our reporting units exceeded the carrying value of the unit by not less than 20% of the
carrying value. While discount rates are only one of several important estimates used in the
analysis, we determined that an increase of one percentage point in the discount rate used for each
respective reporting unit would not have resulted in an impairment indicator for any unit in the
current quarter.
A number of factors, many of which we have no ability to control, could affect our financial
condition, operating results and business prospects and could cause actual results to differ from
the estimates and assumptions we employed. These factors include:
|
|
|
a prolonged global economic crisis; |
|
|
|
|
a significant decrease in the demand for our products; |
|
|
|
|
the inability to develop new and enhanced products and services in a timely manner; |
|
|
|
|
a significant adverse change in legal factors or in the business climate; |
|
|
|
|
an adverse action or assessment by a regulator; |
|
|
|
|
successful efforts by our competitors to gain market share in our markets; |
|
|
|
|
a loss of key personnel; |
|
|
|
|
our determination to dispose of one or more of our reporting units; |
|
|
|
|
the testing for recoverability of a significant asset group within a reporting unit; and |
|
|
|
|
recognition of a goodwill impairment loss in the financial statements of a subsidiary that
is a component of a reporting unit. |
Intangible Assets. We assess the impairment of identifiable intangible assets whenever events
or changes in circumstances indicate that an assets carrying amount may not be recoverable. In
addition, for intangible assets with indefinite lives, we review such assets for impairment on an
annual basis consistent with the timing of the annual evaluation for goodwill. An impairment loss
would be recognized when the sum of the undiscounted estimated future cash flows expected to result
from the use of the asset and its eventual disposition is less than its carrying amount. Such
impairment loss would be measured as the difference between the carrying amount of the asset and
its fair value. Our cash flow assumptions are based on historical and forecasted revenue,
operating costs, and other relevant factors. If managements estimates of future operating results
change, or if there are changes to other assumptions, the estimate of the fair value of our
acquired product rights and other identifiable intangible assets could change significantly. Such
change could result in impairment charges in future periods, which could have a significant impact
on our operating results and financial condition.
We record impairment charges on developed technology or acquired product rights when we
determine that the net realizable value of the assets may not be recoverable. To determine the net
realizable value of the assets, we use the estimated future gross revenue from each product. Our
estimated future gross revenue of each product is based on company forecasts and is subject to
change.
Long-Lived Assets (including Assets Held for Sale). We record impairment charges on
long-lived assets to be held and used when we determine that the carrying value of the long-lived
assets may not be recoverable. Based on the existence of one or more indicators of impairment, we
measure any impairment of long-lived assets based on a projected undiscounted cash flow method
using assumptions determined by management to be commensurate with the risk inherent in our current
business model. Our estimates of cash flows require significant judgment based on our historical
results and anticipated results and are subject to many triggering factors which could change and
cause a material impact to our operating results or financial condition. We record impairment
charges on long-lived assets to be held for sale when we determine that the carrying value of the
long-lived assets may not be recoverable. In determining our fair value, we obtain market value
appraisal information from third-parties.
23
Recently Issued Authoritative Guidance
Information with respect to Recently Issued Authoritative Guidance is in Note 1 of Notes to
Condensed Consolidated Financial Statements in this Form 10-Q, which information is incorporated
herein by reference.
RESULTS OF OPERATIONS
Total Net Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
Net revenue |
|
$ |
1,548 |
|
|
$ |
1,514 |
|
|
$ |
34 |
|
|
|
2 |
% |
|
$ |
4,454 |
|
|
$ |
4,682 |
|
|
$ |
(228 |
) |
|
|
(5 |
)% |
Net revenue increased for the three months ended January 1, 2010, as compared to the same
period last year, due to a $95 million increase in Content, subscription, and maintenance revenue
partially offset by a $61 million decrease in License revenue. The net increase was primarily
driven by the items discussed above under Financial Results and Trends.
Net revenue decreased for the nine months ended January 1, 2010, as compared to the same
period last year, due to a $314 million decrease in License revenue partially offset by an $86
million increase in Content, subscription, and maintenance revenue. The net decrease was primarily
driven by the items discussed above under Financial Results and Trends.
The changes in revenue for the three and nine months ended January 1, 2010 discussed above are
further described in the segment discussions that follow.
Content, subscription, and maintenance revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
Content, subscriptions, and
maintenance revenue |
|
$ |
1,292 |
|
|
$ |
1,197 |
|
|
$ |
95 |
|
|
|
8 |
% |
|
$ |
3,755 |
|
|
$ |
3,669 |
|
|
$ |
86 |
|
|
|
2 |
% |
Percentage of total net revenue |
|
|
83 |
% |
|
|
79 |
% |
|
|
|
|
|
|
|
|
|
|
84 |
% |
|
|
78 |
% |
|
|
|
|
|
|
|
|
Content, subscription, and maintenance revenue increased for the three and nine months
ended January 1, 2010, as compared to the same period last year, as a result of strength in our
Consumer segment, as well as revenue from our fiscal 2009 acquisitions of Message Labs and PC
Tools, and the items discussed above under Financial Results and Trends.
License revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
License revenue |
|
$ |
256 |
|
|
$ |
317 |
|
|
$ |
(61 |
) |
|
|
(19 |
)% |
|
$ |
699 |
|
|
$ |
1,013 |
|
|
$ |
(314 |
) |
|
|
(31 |
)% |
Percentage of total net revenue |
|
|
17 |
% |
|
|
21 |
% |
|
|
|
|
|
|
|
|
|
|
16 |
% |
|
|
22 |
% |
|
|
|
|
|
|
|
|
License revenue decreased for the three and nine months ended January 1, 2010, as
compared to the same periods last year, primarily due to the global economic slowdown and customers
emphasizing purchases of smaller volumes of new licenses consistent with their near term needs
during the periods presented, as well as for the items discussed above under Financial Results and
Trends.
24
Net revenue and operating income by segment
Consumer segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
Consumer revenue |
|
$ |
478 |
|
|
$ |
432 |
|
|
$ |
46 |
|
|
|
11 |
% |
|
$ |
1,388 |
|
|
$ |
1,341 |
|
|
$ |
47 |
|
|
|
4 |
% |
Percentage of total net revenue |
|
|
31 |
% |
|
|
29 |
% |
|
|
|
|
|
|
|
|
|
|
31 |
% |
|
|
29 |
% |
|
|
|
|
|
|
|
|
Consumer operating income |
|
$ |
206 |
|
|
$ |
224 |
|
|
$ |
(18 |
) |
|
|
(8 |
)% |
|
$ |
645 |
|
|
$ |
734 |
|
|
$ |
(89 |
) |
|
|
(12 |
)% |
Percentage of Consumer revenue |
|
|
43 |
% |
|
|
52 |
% |
|
|
|
|
|
|
|
|
|
|
46 |
% |
|
|
55 |
% |
|
|
|
|
|
|
|
|
Consumer revenue increased for the three and nine months ended January 1, 2010, as
compared to the same period last year, primarily due to increases in revenue from acquired security
products, our core consumer products in the electronic channel, and the items discussed above under
Financial Results and Trends.
Our electronic channel sales are derived from OEMs, subscriptions, upgrades, online sales, and
renewals. For the three and nine months ended January 1, 2010, electronic channel revenue
increased as compared to the same periods last year. Electronic sales accounted for approximately
80% of Consumer revenue for the three and nine months ended January 1, 2010, which is comparable to
the percentage for the same periods last year.
Operating income for the Consumer segment decreased for the three and nine months ended
January 1, 2010, as compared to the same periods last year, as expense growth outpaced revenue
growth. Total expenses for the segment increased primarily as a result of the higher OEM placement
fees discussed above and costs associated with our development of our new proprietary eCommerce
platform.
Security and Compliance segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1 |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
Security and Compliance revenue |
|
$ |
369 |
|
|
$ |
354 |
|
|
$ |
15 |
|
|
|
4 |
% |
|
$ |
1,050 |
|
|
$ |
1,102 |
|
|
$ |
(52 |
) |
|
|
(5 |
)% |
Percentage of total net revenue |
|
|
24 |
% |
|
|
23 |
% |
|
|
|
|
|
|
|
|
|
|
24 |
% |
|
|
23 |
% |
|
|
|
|
|
|
|
|
Security and Compliance
operating income |
|
$ |
104 |
|
|
$ |
119 |
|
|
$ |
(15 |
) |
|
|
(13 |
)% |
|
$ |
271 |
|
|
$ |
335 |
|
|
$ |
(64 |
) |
|
|
(19 |
)% |
Percentage of Security and
Compliance revenue |
|
|
28 |
% |
|
|
34 |
% |
|
|
|
|
|
|
|
|
|
|
26 |
% |
|
|
30 |
% |
|
|
|
|
|
|
|
|
Security and Compliance revenue increased for the three months ended January 1, 2010, as
compared to the same period last year, primarily due to increases in revenue from our Symantec
Hosted Services business, our data loss prevention products and the items discussed above under
Financial Results and Trends. These increases were partially offset by decreases in revenue as a
result of decreased demand due to continued tight IT spending discussed above under Financial
Results and Trends.
Security and Compliance revenue decreased for the nine months ended January 2, 2009, as
compared to the same period last year, as a result of the items discussed above under Financial
Results and Trends, partially offset by increases in revenue from acquired product lines.
Operating income for the Security and Compliance segment decreased for the three months ended
January 1, 2010, as compared to the same period last year, as the increases in expenses more than
offset the revenue increase. Operating income for the segment decreased for the nine months ended
January 1, 2010, as compared to the same periods last year, as revenue decreased while expenses
increased. For the three and nine months ended January 1, 2010, total expenses increased as a
result of costs from our Symantec Hosted Services business.
25
Storage and Server Management segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
Storage and Server Management revenue |
|
$ |
594 |
|
|
$ |
621 |
|
|
$ |
(27 |
) |
|
|
(4 |
)% |
|
$ |
1,710 |
|
|
$ |
1,907 |
|
|
$ |
(197 |
) |
|
|
(10 |
)% |
Percentage of total net revenue |
|
|
38 |
% |
|
|
41 |
% |
|
|
|
|
|
|
|
|
|
|
38 |
% |
|
|
41 |
% |
|
|
|
|
|
|
|
|
Storage and Server Management
operating income |
|
$ |
289 |
|
|
$ |
283 |
|
|
$ |
6 |
|
|
|
2 |
% |
|
$ |
825 |
|
|
$ |
816 |
|
|
$ |
9 |
|
|
|
1 |
% |
Percentage of Storage and Server
Management revenue |
|
|
49 |
% |
|
|
46 |
% |
|
|
|
|
|
|
|
|
|
|
48 |
% |
|
|
43 |
% |
|
|
|
|
|
|
|
|
Storage and Server Management revenue decreased for the three and nine months ended
January 1, 2010, as compared to the same periods last year, primarily due to our customers
continuing to buy smaller volumes of new licenses consistent with their near term needs,
particularly with respect to our storage management products, as well as the items discussed above
under Financial Results and Trends.
Operating income for the Storage and Server Management segment increased for the three and
nine months ended January 1, 2010, as compared to the same periods last year, as the decrease in
expenses more than offset the decrease in revenue due to our ongoing focus on cost efficiency.
Services segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
Services revenue |
|
$ |
107 |
|
|
$ |
107 |
|
|
$ |
|
|
|
|
0 |
% |
|
$ |
306 |
|
|
$ |
331 |
|
|
$ |
(25 |
) |
|
|
(8 |
)% |
Percentage of total net revenue |
|
|
7 |
% |
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
7 |
% |
|
|
7 |
% |
|
|
|
|
|
|
|
|
Services operating income |
|
$ |
11 |
|
|
$ |
15 |
|
|
$ |
(4 |
) |
|
|
(27 |
)% |
|
$ |
30 |
|
|
$ |
22 |
|
|
$ |
8 |
|
|
|
36 |
% |
Percentage of Services revenue |
|
|
10 |
% |
|
|
14 |
% |
|
|
|
|
|
|
|
|
|
|
10 |
% |
|
|
7 |
% |
|
|
|
|
|
|
|
|
Services revenue was consistent for the three months ended January 1, 2010, as compared
to the same period last year. Services revenue decreased for the nine months ended January 1,
2010, as compared to the same period last year, primarily due to a reduction in consulting revenue
associated with new license sales, in addition to the items discussed above under Financial
Results and Trends.
Operating income for the Services segment decreased for the three months ended January 1,
2010, as compared to the same period last year, as expenses increased while revenue remained
consistent. Operating income for the Services segment increased for the nine months ended January
1, 2010, as compared to the same period last year, as expense discipline led to better margins.
Other segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
Other revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
0 |
% |
|
$ |
|
|
|
$ |
1 |
|
|
$ |
(1 |
) |
|
|
(100 |
)% |
Percentage of total net revenue |
|
|
0 |
% |
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
0 |
% |
|
|
0 |
% |
|
|
|
|
|
|
|
|
Other operating loss |
|
$ |
(333 |
) |
|
$ |
(7,414 |
) |
|
$ |
7,081 |
|
|
|
* |
|
|
$ |
(1,085 |
) |
|
$ |
(8,185 |
) |
|
$ |
7,100 |
|
|
|
* |
|
|
|
|
* |
|
Percentage not meaningful |
Revenue from our Other segment consists primarily of sunset products and products nearing the
end of their life cycle. The operating loss of our Other segment includes general and
administrative expenses; amortization of acquired product rights, other intangible assets, and
other assets; charges such as stock-based compensation and restructuring; and certain indirect
costs that are not charged to the other operating segments. The operating loss of our Other
segment for the three and nine months ended January 2, 2009 primarily consisted of a non-cash
goodwill impairment charge of $7.0 billion.
26
Net revenue by geographic region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
Americas (U.S., Canada and Latin
America) |
|
$ |
824 |
|
|
$ |
828 |
|
|
$ |
(4 |
) |
|
|
0 |
% |
|
$ |
2,399 |
|
|
$ |
2,511 |
|
|
$ |
(112 |
) |
|
|
(4 |
)% |
Percentage of total net revenue |
|
|
53 |
% |
|
|
55 |
% |
|
|
|
|
|
|
|
|
|
|
54 |
% |
|
|
54 |
% |
|
|
|
|
|
|
|
|
EMEA (Europe, Middle East, Africa) |
|
$ |
487 |
|
|
$ |
474 |
|
|
$ |
13 |
|
|
|
3 |
% |
|
$ |
1,377 |
|
|
$ |
1,512 |
|
|
$ |
(135 |
) |
|
|
(9 |
)% |
Percentage of total net revenue |
|
|
32 |
% |
|
|
31 |
% |
|
|
|
|
|
|
|
|
|
|
31 |
% |
|
|
32 |
% |
|
|
|
|
|
|
|
|
Asia Pacific/Japan |
|
$ |
237 |
|
|
$ |
212 |
|
|
$ |
25 |
|
|
|
12 |
% |
|
$ |
678 |
|
|
$ |
659 |
|
|
$ |
19 |
|
|
|
3 |
% |
Percentage of total net revenue |
|
|
15 |
% |
|
|
14 |
% |
|
|
|
|
|
|
|
|
|
|
15 |
% |
|
|
14 |
% |
|
|
|
|
|
|
|
|
Revenue for three months ended January 1, 2010, as compared to the same period last year,
increased 12% for the Asia Pacific/Japan region, while EMEA increased 3% and the Americas was
relatively consistent. Revenue for the nine months ended January 1, 2010, as compared to the same
period last year, increased 3% for the Asia Pacific/Japan region, while EMEA decreased 9% and the
Americas decreased 4%. The reasons for the changes during the periods above are discussed under
Financial Results and Trends, particularly with respect to the impact of foreign currency
fluctuations on the periods presented.
Our international sales are and will continue to be a significant portion of our net revenue.
As a result, net revenue will continue to be affected by foreign currency exchange rates as
compared to the U.S. dollar. We are unable to predict the extent to which revenue in future
periods will be impacted by changes in foreign currency exchange rates. If international sales
become a greater portion of our total sales in the future, changes in foreign currency exchange
rates may have a potentially greater impact on our revenue and operating results.
Cost of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
$ |
258 |
|
|
$ |
299 |
|
|
$ |
(41 |
) |
|
|
(14 |
)% |
|
$ |
829 |
|
|
$ |
920 |
|
|
$ |
(91 |
) |
|
|
(10 |
)% |
Gross margin |
|
|
83 |
% |
|
|
80 |
% |
|
|
|
|
|
|
|
|
|
|
81 |
% |
|
|
80 |
% |
|
|
|
|
|
|
|
|
Cost of revenue consists primarily of the amortization of acquired product rights,
fee-based technical support costs, costs of billable services, payments to OEMs under
revenue-sharing arrangements, manufacturing and direct material costs, and royalties paid to third
parties under technology licensing agreements.
Cost of revenue decreased for the three and nine months ended January 1, 2010, as compared to
the same periods last year, primarily due to a decrease in amortization of acquired product rights
related to our acquisition of Veritas.
Cost of content, subscription, and maintenance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
Cost of content, subscription,
and maintenance |
|
$ |
208 |
|
|
$ |
200 |
|
|
$ |
8 |
|
|
|
4 |
% |
|
$ |
624 |
|
|
$ |
631 |
|
|
$ |
(7 |
) |
|
|
(1 |
)% |
As a percentage of related revenue |
|
|
16 |
% |
|
|
17 |
% |
|
|
|
|
|
|
|
|
|
|
17 |
% |
|
|
17 |
% |
|
|
|
|
|
|
|
|
Cost of content, subscription, and maintenance consists primarily of fee-based technical
support costs, costs of billable services, and payments to OEMs under revenue-sharing agreements.
Cost of content, subscription, and maintenance as a percentage of related revenue remained
relatively consistent for the three and nine months ended January 1, 2010, as compared to the same
periods last year, as increases in royalty and technical support costs were partially offset by
decreases in services and distribution costs for the respective periods.
Cost of licenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of licenses |
|
$ |
6 |
|
|
$ |
9 |
|
|
$ |
(3 |
) |
|
|
(33 |
)% |
|
$ |
16 |
|
|
$ |
27 |
|
|
$ |
(11 |
) |
|
|
(41 |
)% |
As a percentage of related revenue |
|
|
2 |
% |
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
2 |
% |
|
|
3 |
% |
|
|
|
|
|
|
|
|
27
Cost of licenses consists primarily of royalties paid to third parties under technology
licensing agreements and manufacturing and direct material costs. Cost of licenses remained
relatively consistent as a percentage of the related revenue for the three and nine months ended
January 1, 2010, as compared to the same periods last year.
Amortization of acquired product rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired product rights |
|
$ |
44 |
|
|
$ |
90 |
|
|
$ |
(46 |
) |
|
|
(51 |
)% |
|
$ |
189 |
|
|
$ |
262 |
|
|
$ |
(73 |
) |
|
|
(28 |
)% |
Percentage of total net revenue |
|
|
3 |
% |
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
4 |
% |
|
|
6 |
% |
|
|
|
|
|
|
|
|
Acquired product rights are comprised of developed technologies and patents from acquired
companies. The decrease in amortization for the three and nine months ended January 1, 2010 as
compared to the same periods last year is primarily due to certain acquired product rights from our
acquisition of Veritas becoming fully amortized during the first quarter of our fiscal 2010. This
decrease was partially offset by additional amortization from product rights acquired through
acquisitions during fiscal 2009.
Operating Expenses
Operating expenses overview
As discussed above under Financial Results and Trends, our operating expenses for the nine
months ended January 1, 2010 include 39 weeks of activity as compared to 40 weeks for the same
period last year, which had a favorable impact on our operating expenses for the nine month,
year-over-year periods. Our operating expenses during the three months ended January 1, 2010 were
unfavorably impacted by a weaker U.S. dollar as compared to the same period last year while
operating expenses during the nine months ended January 1, 2010 were favorably impacted by a
stronger U.S. dollar as compared to the same period last year. Both periods were favorably
impacted by the restructuring plans discussed below.
Sales and marketing expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
$ |
635 |
|
|
$ |
581 |
|
|
$ |
54 |
|
|
|
9 |
% |
|
$ |
1,770 |
|
|
$ |
1,841 |
|
|
$ |
(71 |
) |
|
|
(4 |
)% |
Percentage of total net revenue |
|
|
41 |
% |
|
|
38 |
% |
|
|
|
|
|
|
|
|
|
|
40 |
% |
|
|
39 |
% |
|
|
|
|
|
|
|
|
Sales and marketing expenses increased during the three months ended January 1, 2010 and
decreased during the nine months ended January 1, 2010, as compared to the same periods last year,
as a result of the items discussed above under Operating expenses overview. Sales and marketing
expenses increased as a result of increased OEM placement fees and costs associated with the
deployment of our new proprietary eCommerce platform during the three months ended January 1,
2010. For the nine months ended January 1, 2010, expenses decreased as a result of lower
commissions partially offset by increases in OEM fees and costs associated with the deployment of
our new proprietary eCommerce platform.
Research and development expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
210 |
|
|
$ |
194 |
|
|
$ |
16 |
|
|
|
8 |
% |
|
$ |
641 |
|
|
$ |
645 |
|
|
$ |
(4 |
) |
|
|
(1 |
)% |
Percentage of total net revenue |
|
|
14 |
% |
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
14 |
% |
|
|
14 |
% |
|
|
|
|
|
|
|
|
Research and development expenses increased during the three months ended January 1, 2010
and decreased during the nine months ended January 1, 2010, as compared to the same periods last
year, as a result of the items discussed above under Operating expenses overview.
28
General and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
$ |
92 |
|
|
$ |
83 |
|
|
$ |
9 |
|
|
|
11 |
% |
|
$ |
265 |
|
|
$ |
261 |
|
|
$ |
4 |
|
|
|
2 |
% |
Percentage of total net revenue |
|
|
6 |
% |
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
6 |
% |
|
|
6 |
% |
|
|
|
|
|
|
|
|
As a percentage of net revenue, general and administrative expenses remained relatively
consistent for the three and nine months ended January 1, 2010, as compared to the same periods
last year, largely a result of the items discussed above under Operating expenses overview.
Amortization of other purchased intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
Amortization of other
purchased intangible assets |
|
$ |
61 |
|
|
$ |
60 |
|
|
$ |
1 |
|
|
|
2 |
% |
|
$ |
186 |
|
|
$ |
171 |
|
|
$ |
15 |
|
|
|
9 |
% |
Percentage of total net revenue |
|
|
4 |
% |
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
4 |
% |
|
|
4 |
% |
|
|
|
|
|
|
|
|
Other purchased intangible assets are comprised of customer relationships and tradenames.
Amortization for the three and nine months ended January 1, 2010, compared to the same periods
last year, increased as a result of our fiscal 2009 acquisitions. As a percentage of net revenue,
amortization of other purchased intangible assets remained relatively consistent for the three and
nine months ended January 1, 2010, as compared to the same periods last year.
Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
January 1, |
|
|
January 2, |
|
|
|
|
|
|
|
|
|
|
January 1, |
|
|
January 2, |
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
$ |
|
|
% |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance |
|
$ |
3 |
|
|
$ |
38 |
|
|
|
|
|
|
|
|
|
|
$ |
32 |
|
|
$ |
54 |
|
|
|
|
|
|
|
|
|
Facilities |
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
Transition, transformation and other costs |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring |
|
$ |
5 |
|
|
$ |
47 |
|
|
$ |
(42 |
) |
|
|
(89 |
)% |
|
$ |
64 |
|
|
$ |
73 |
|
|
$ |
(9 |
) |
|
|
(12 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of total net revenues |
|
|
0 |
% |
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
1 |
% |
|
|
2 |
% |
|
|
|
|
|
|
|
|
In connection with the restructuring plans, which we refer to as our 2009 Restructuring
Plan (2009 Plan) and our 2008 Restructuring Plan (2008 Plan), as described in Note 7 of the
Notes to Condensed Consolidated Financial Statements, restructuring charges were $5 million and $64
million for the three and nine months ended January 1, 2010, respectively, compared to $47 million
and $73 million for the three and nine months ended January 2, 2009, respectively.
The restructuring charges for the three months ended January 1, 2010 consisted of severance
and business structure changes related to the 2008 Plan and transition and transformation costs
related to the outsourcing of certain back office functions. The restructuring charges for the
three months ended January 2, 2009 primarily consisted of severance charges related to the 2009
Plan.
The restructuring charges for the nine months ended January 1, 2010 primarily consisted of
severance and charges related to the 2008 Plan and transition and transformation costs related to
the outsourcing of certain back office functions. The restructuring charges for the nine months
ended January 2, 2009 consisted of severance charges related to the 2009 Plan, facilities charges
related to acquisitions and severance charges related to the 2008 Plan.
Total remaining severance charges are estimated to range from $15 million to $30 million,
primarily for the 2008 Plan. Total remaining costs for the transition and transformation
activities associated with outsourcing back office functions are estimated to be approximately $20
million to $25 million. Total remaining costs for the 2009 Plan are not expected to be material.
29
Impairment of goodwill and Loss and impairment of assets held for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of goodwill |
|
$ |
|
|
|
$ |
7,006 |
|
|
$ |
(7,006 |
) |
|
|
(100 |
)% |
|
$ |
|
|
|
$ |
7,006 |
|
|
$ |
(7,006 |
) |
|
|
(100 |
)% |
Percentage of total net revenue |
|
|
0 |
% |
|
|
463 |
% |
|
|
|
|
|
|
|
|
|
|
0 |
% |
|
|
150 |
% |
|
|
|
|
|
|
|
|
Loss and impairment of assets
held for sale |
|
$ |
10 |
|
|
$ |
17 |
|
|
$ |
(7 |
) |
|
|
(41 |
)% |
|
$ |
13 |
|
|
$ |
43 |
|
|
$ |
(30 |
) |
|
|
(70 |
)% |
Percentage of total net revenue |
|
|
1 |
% |
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
0 |
% |
|
|
0 |
% |
|
|
|
|
|
|
|
|
In accordance with the authoritative guidance on goodwill and other intangibles, we
evaluate goodwill for impairment at least annually and any time business conditions indicate a
potential change in recoverability. During the third quarter of fiscal 2009, we concluded that
there were impairment indicators, including the challenging economic environment and a decline in
our market capitalization, which required us to perform an interim goodwill impairment analysis.
As a result of that analysis, we estimated and recorded a non-cash goodwill impairment charge of
$7.0 billion in the third quarter of fiscal 2009.
During the three and nine months ended January 1, 2010, we sold a property for $42 million,
which resulted in a loss of $10 million. During the three and nine months ended January 2, 2009,
we recognized impairment of $17 million and $43 million, respectively, on certain land and
buildings classified as held for sale. The impairment was recorded in accordance with the
authoritative guidance that requires a long-lived asset classified as held for sale to be measured
at the lower of its carrying amount or fair value, less cost to sell.
Non-operating Income and Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
January 1, |
|
|
January 2, |
|
|
Change in |
|
|
January 1, |
|
|
January 2, |
|
|
Change in |
|
|
|
2010 |
|
|
2009 |
|
|
$ |
|
|
% |
|
|
2010 |
|
|
2009 |
|
|
$ |
|
|
% |
|
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
1 |
|
|
$ |
5 |
|
|
|
|
|
|
|
|
|
|
$ |
4 |
|
|
$ |
35 |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(33 |
) |
|
|
(31 |
) |
|
|
|
|
|
|
|
|
|
|
(96 |
) |
|
|
(94 |
) |
|
|
|
|
|
|
|
|
Other income, net |
|
|
44 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
52 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
12 |
|
|
$ |
(9 |
) |
|
$ |
21 |
|
|
|
* |
|
|
$ |
(40 |
) |
|
$ |
(51 |
) |
|
$ |
11 |
|
|
|
22 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Percentage not meaningful |
The decrease in interest income during the three and nine months ended January 1, 2010, as
compared to the same periods last year, is due to a lower average yield on our invested cash and
short-term investment balances. The decrease in interest income is partially offset by higher
average cash balances for the three months ended January 1, 2010 and to a lesser extent for the
nine months ended January 1, 2010. Interest expense for the three and nine months ended January 1,
2010, as compared to the same periods last year, remained relatively consistent. Other income, net
for the three and nine months ended January 1, 2010 includes net gains of $43 million and $46
million, respectively, from the liquidation of certain foreign legal entities. The liquidations
resulted in the release of cumulative translation adjustments from accumulated other comprehensive
income related to these entities.
(Benefit) provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Benefit) provision for income taxes |
|
$ |
(23 |
) |
|
$ |
22 |
|
|
$ |
(45 |
) |
|
|
(205 |
)% |
|
$ |
86 |
|
|
$ |
160 |
|
|
$ |
(74 |
) |
|
|
(46 |
)% |
Effective income tax rate |
|
|
(8 |
)% |
|
|
(0.3 |
)% |
|
|
|
|
|
|
|
|
|
|
13 |
% |
|
|
(3 |
)% |
|
|
|
|
|
|
|
|
The effective tax rate was approximately (8)% and (0.3)% for the three months ended
January 1, 2010 and January 2, 2009, respectively, and 13% and (3)% for the nine months ended
January 1, 2010 and January 2, 2009, respectively.
30
The tax expense for the three and nine months ended January 1, 2010 was significantly
reduced by the following benefits recognized in the third quarter of fiscal 2010: (1) $78.5 million
tax benefit arising from the Veritas v. Commissioner Tax Court decision (see further discussion
below), (2) $9 million tax benefit from the reduction of our valuation allowance for certain
deferred tax assets, and (3) $5 million benefit to adjust taxes provided in prior periods. The
change in the valuation allowance follows discussions with Irish Revenue in the quarter, the result
of which accelerates the timing of the use of certain Irish tax loss carryforwards in the future.
The tax expense for the nine months ended January 1, 2010 is otherwise increased by a $7 million
tax expense recognized in the first quarter of fiscal 2010 as a result of the May 2009 Ninth
Circuit Court of Appeals decision in Xilinx v. Commissioner (see further discussion below). The
tax expense for the three and nine months ended January 2, 2009 was materially impacted by the
inclusion of a $44 million tax benefit associated with the $7.0 billion impairment of goodwill in
the third quarter of fiscal 2009.
The provision for the three and nine months ended January 1, 2010 otherwise reflects a
forecast tax rate of 31%. The provision for the three and nine months ended January 2, 2009
otherwise reflected a forecast tax rate of 35%. The forecast tax rates for all periods presented
reflect the benefits of lower-taxed foreign earnings, domestic manufacturing incentives, and
research and development credits, partially offset by state income taxes and non-deductible stock
based compensation. The forecast tax rate in fiscal 2010 is lower than in fiscal 2009 primarily
due to higher benefits from low-taxed foreign earnings.
On May 27, 2009, the U.S. Court of Appeals for the Ninth Circuit overturned a 2005 U.S. Tax
Court ruling in Xilinx v. Commissioner, holding that stock-based compensation related to research
and development (R&D) must be shared by the participants of a R&D cost sharing arrangement. The
Ninth Circuit held that related parties to such an arrangement must share stock option costs,
notwithstanding the U.S. Tax Courts finding that unrelated parties in such an arrangement would
not share such costs. Symantec has a similar R&D cost sharing arrangement in place. The Ninth
Circuits reversal of the U.S. Tax Courts decision changed our estimate of stock option related
tax benefits previously recognized under the authoritative guidance on income taxes. As a result
of the Ninth Circuits ruling, we increased our liability for unrecognized tax benefits, recording
a tax expense of approximately $7 million and a reduction of additional paid-in capital of
approximately $30 million in the first quarter of fiscal 2010. On January 13, 2010, the Ninth
Circuit Court of Appeals withdrew its issued opinion. We will monitor any further actions by the
Ninth Circuit over the balance of the fourth quarter of fiscal 2010 in assessing the need to adjust
our liability for unrecognized tax benefits. Accordingly, we believe that there is a reasonable
possibility of a $37 million change to our total unrecognized tax benefits within the next twelve
months.
On March 29, 2006, we received a Notice of Deficiency from the IRS claiming that we owe $867
million of additional taxes, excluding interest and penalties, for the 2000 and 2001 tax years
based on an audit of Veritas. On June 26, 2006, we filed a petition with the U.S. Tax Court
protesting the IRS claim for such additional taxes. In the fourth quarter of fiscal 2007, we
agreed to pay $7 million out of $35 million originally assessed by the IRS in connection with
several of the lesser issues covered in the assessment. The IRS agreed to waive the assessment of
penalties. During July 2008, we completed the trial phase of the Tax Court case, which dealt with
the remaining issue covered in the assessment. At trial, the IRS changed its position with respect
to this remaining issue, which decreased the remaining amount at issue from $832 million to $545
million, excluding interest. We filed our post-trial briefs in October 2008 and rebuttal briefs in
November 2008 with the U.S. Tax Court.
On December 10, 2009, the U.S. Tax Court issued its opinion, finding that our transfer pricing
methodology, with appropriate adjustments, was the best method for assessing the value of the
transaction at issue between Veritas and its offshore subsidiary. The Tax Court judge provided
guidance as to how adjustments would be made to correct the application of the method used by
Veritas. We remeasured and decreased our liability for unrecognized tax benefits accordingly,
resulting in a $78.5 million tax benefit in the third quarter of fiscal 2010. Final computations as
directed by the Ruling are not complete and, accordingly, we may make further adjustments to our
tax liability in the future. The Tax Court ruling is subject to appeal. We have $110 million on
deposit with the IRS pertaining to this matter. We do not anticipate making any further federal
tax payments for these years.
On December 2, 2009, we received a Revenue Agents Report from the IRS for the Veritas 2002
through 2005 tax years assessing additional taxes due. We agree with $30 million of the tax
assessment, excluding interest, but will contest the other $80 million of tax assessed and all
penalties. The unagreed issues concern transfer pricing matters comparable to the one that was
resolved in our favor in the Veritas v. Commissioner Tax Court decision. On January 15, 2010 we
filed a protest with the IRS in connection with the $80 million of tax assessed.
We continue to monitor the progress of ongoing tax controversies and the impact, if any, of
the expected tolling of the statute of limitations in various taxing jurisdictions.
31
Loss from joint venture
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|
Three Months Ended |
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
Change in |
|
January 1, |
|
January 2, |
|
Change in |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
($ in millions) |
Loss from joint venture |
|
$ |
12 |
|
|
$ |
16 |
|
|
$ |
(4 |
) |
|
|
(25 |
)% |
|
$ |
37 |
|
|
$ |
33 |
|
|
$ |
4 |
|
|
|
12 |
% |
On February 5, 2008, Symantec formed Huawei-Symantec, Inc. (joint venture) with a
subsidiary of Huawei Technologies Co., Ltd. (Huawei). The joint venture is domiciled in Hong
Kong with principal operations in Chengdu, China. The joint venture develops, manufactures,
markets and supports security and storage appliances to global telecommunications carriers and
enterprise customers. We record our proportionate share of the joint ventures net income or loss
one quarter in arrears.
For the three and nine months ended January 1, 2010, we recorded a loss of approximately $12
million and $37 million related to our share of the joint ventures net loss incurred for the
period from July 1, 2009 to September 30, 2009, and the period from January 1, 2009 to September
30, 2009, respectively. For the three and nine months ended January 2, 2009, we recorded a loss of
approximately $16 million and $33 million related to our share of the joint ventures net loss for
the period from July 1, 2008 to September 30, 2008, and February 5, 2008 to September 30, 2008,
respectively.
The joint venture adopted new authoritative guidance on revenue arrangements with multiple
deliverables during its period ended December 31, 2009, which will be applied to the beginning of
its fiscal year. The expected impact of adopting the new authoritative guidance on the joint
ventures financial statements will be a decrease in its net loss of approximately $21 million to
$24 million for its fiscal year ended December 31, 2009. We expect to include our proportionate
share of the decrease in net loss of approximately $10 million to $12 million in our Annual Report
on Form 10-K for our fiscal year ending April 2, 2010. Approximately $1 million to $2 million of
the decrease in net loss will impact our fiscal fourth quarter.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Cash
We have historically relied on cash flow from operations, borrowings under a credit facility,
issuances of convertible notes, and equity securities for our liquidity needs. Key sources of cash
include earnings from operations, existing cash and cash equivalents, and our revolving credit
facility.
In fiscal 2007, we entered into a five-year $1 billion senior unsecured revolving credit
facility that expires in July 2011. In order to be able to draw on the credit facility, we must
maintain certain covenants, including a specified ratio of debt to earnings (before interest,
taxes, depreciation, amortization and impairment) as well as certain other non-financial covenants.
As of January 1, 2010, we were in compliance with all required covenants and there was no
outstanding balance on the credit facility.
As of January 1, 2010, we had cash and cash equivalents of $2.6 billion and short-term
investments of $18 million resulting in a net liquidity position of approximately $3.6 billion,
which is defined as unused availability of the credit facility, cash and cash equivalents and
short-term investments.
We believe that our existing cash and investment balances, our borrowing capacity, and cash
generated from operations will be sufficient to meet our working capital and capital expenditures
requirements for at least the next 12 months.
Uses of Cash
Our principal cash requirements include working capital, capital expenditures, payments of
principal and interest on our debt and payments of taxes. In addition, we regularly evaluate our
ability to repurchase stock, pay debts and acquire other businesses.
Line of Credit. There were no borrowings under our credit facility for the nine months ended
January 1, 2010. For the nine months ended January 2, 2009, we repaid the entire $200 million
principal amount, plus $3 million of accrued interest, that we borrowed during fiscal 2008 under
the credit facility.
32
Acquisition-Related. For the nine months ended January 1,
2010, we acquired a company for an aggregate payment of $19 million, net of cash acquired. For the
nine months ended January 2, 2009, we acquired MessageLabs, PC Tools, and several other companies
for an aggregate payment of $1.0 billion, net of cash acquired.
Convertible Senior Notes. In June 2006, we issued $1.1 billion principal amount of 0.75%
Convertible Senior Notes due June 15, 2011, and $1.0 billion principal amount of 1.00% Convertible
Senior Notes (collectively the Senior Notes) due June 15, 2013, to initial purchasers in a
private offering for resale to qualified institutional buyers pursuant to SEC Rule 144A. For the
nine months ended January 1, 2010 and January 2, 2009, we have not repaid any of this debt other
than the related interest costs.
Stock Repurchases. For the nine months ended January 1, 2010, we repurchased 23 million
shares, or $364 million, of our common stock. For the nine months ended January 2, 2009, we
repurchased 35 million shares, or $600 million, of our common stock. As of January 1, 2010, we had
$936 million remaining under the plan authorized for future repurchases.
Cash Flows
The following table summarizes, for the periods indicated, selected items in our Condensed
Consolidated Statements of Cash Flows:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
January 1, |
|
January 2, |
|
|
2010 |
|
2009 |
|
|
(In millions) |
Net cash provided by (used in) |
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
990 |
|
|
$ |
1,064 |
|
Investing activities |
|
|
52 |
|
|
|
(764 |
) |
Financing activities |
|
|
(304 |
) |
|
|
(616 |
) |
Operating Activities
Net cash provided by operating activities was $990 million for the nine months ended January
1, 2010, which resulted from net income of $523 million adjusted for non-cash items, including
depreciation and amortization charges of $640 million and stock-based compensation expense of $124
million. These amounts were partially offset by a decrease in income taxes payable of $118 million
primarily related to the outcome of the Veritas v. Commissioner Tax Court decision (see Note 12)
and a decrease in deferred revenue of $95 million.
Net cash provided by operating activities was $1.1 billion for the nine months ended January
2, 2009, which resulted from a net loss of $6.5 billion adjusted for non-cash items, including
goodwill impairment of $7.0 billion, depreciation and amortization charges of $697 million and
stock-based compensation expense of $123 million. These amounts were partially offset by an
increase in trade accounts receivable of $157 million.
Investing Activities
Net cash provided by investing activities was $52 million for the nine months ended January 1,
2010 and was primarily due to net proceeds from the sale of available-for-sale securities of $188
million, partially offset by $149 million paid for capital expenditures.
Net cash used in investing activities was $764 million for the nine months ended January 2,
2009 and was due to $1.0 billion paid for acquisitions, net of cash acquired, and $215 million paid
for capital expenditures, partially offset by net proceeds of $456 million from the sale of
short-term investments which were used to partially fund our acquisitions.
Financing Activities
Net cash used in financing activities of $304 million for the nine months ended January 2,
2010 was due to repurchases of common stock of $364 million, partially offset by net proceeds from
sales of common stock through employee stock plans of $73 million.
Net cash used in financing activities of $616 million for the nine months ended January 2,
2009 was primarily due to repurchases of common stock of $600 million and the repayment of $200
million on our senior unsecured revolving credit facility, partially offset by net proceeds from
sales of common stock through employee stock plans of $189 million.
33
Contractual Obligations
There have been no significant changes in our contractual obligations during the nine months
ended January 1, 2010, as compared to the contractual obligations disclosed in Managements
Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II,
Item 7, of our Annual Report on Form 10-K for the fiscal year ended April 3, 2009.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no significant changes in our market risk exposures during the nine months
ended January 1, 2010 as compared to the market risk exposures disclosed in Managements Discussion
and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7A, of
our Annual Report on Form 10-K for the fiscal year ended April 3, 2009.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
The SEC defines the term disclosure controls and procedures to mean a companys controls and
other procedures that are designed to ensure that information required to be disclosed in the
reports that it files or submits under the Exchange Act is recorded, processed, summarized, and
reported, within the time periods specified in the SECs rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by an issuer in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the issuers management, including its principal
executive and principal financial officers, or persons performing similar functions, as appropriate
to allow timely decisions regarding required disclosure. Our Chief Executive Officer and our Chief
Financial Officer have concluded, based on an evaluation of the effectiveness of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange
Act) by our management, with the participation of our Chief Executive Officer and our Chief
Financial Officer, that our disclosure controls and procedures were effective as of the end of the
period covered by this report.
(b) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months
ended January 1, 2010 that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
(c) Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not
expect that our disclosure controls and procedures or our internal controls will prevent all errors
and all fraud. A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within our Company have been detected.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information with respect to this Item may be found in Note 8 of Notes to Condensed
Consolidated Financial Statements in this Form 10-Q, which information is incorporated into this
Part II, Item 1 by reference.
Item 1A. Risk Factors
A description of the risks associated with our business, financial condition, and results
of operations is set forth in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal
year ended April 3, 2009. There have been no material changes in our risks from such description.
34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Stock repurchases during the three months ended January 1, 2010 were as follows:
ISSUER PURCHASES OF EQUITY SECURITIES
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
Maximum Dollar |
|
|
|
|
|
|
|
|
|
|
Shares Purchased |
|
Value of Shares That |
|
|
|
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|
|
|
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|
|
Under Publicly |
|
May Yet Be |
|
|
Total Number of |
|
Average Price |
|
Announced Plans |
|
Purchased Under the |
|
|
Shares Purchased |
|
Paid per Share |
|
or Programs |
|
Plans or Programs |
|
|
|
|
|
|
(In millions, except per share data) |
|
|
|
|
October 3, 2009 to October 30, 2009 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
1,057 |
|
October 31, 2009 to November 27, 2009 |
|
|
2 |
|
|
$ |
17.84 |
|
|
|
2 |
|
|
$ |
1,027 |
|
November 28, 2009 to January 1, 2010 |
|
|
5 |
|
|
$ |
17.73 |
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|
5 |
|
|
$ |
936 |
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|
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|
|
Total |
|
|
7 |
|
|
$ |
17.76 |
|
|
|
7 |
|
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|
|
|
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|
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|
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|
For information regarding our stock repurchase programs, see Note 9 of Notes to Condensed
Consolidated Financial Statements, which information is incorporated herein by reference.
35
Item 6. Exhibits
|
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Incorporated by Reference |
|
|
Exhibit |
|
|
|
|
|
File |
|
|
|
File |
|
Filed with |
Number |
|
Exhibit Description |
|
Form |
|
Number |
|
Exhibit |
|
Date |
|
this 10-Q |
10.01*
|
|
Amendment to
the Symantec
Executive Retention
Plan
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
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31.01
|
|
Certification of
Chief Executive
Officer pursuant to
Section 302 of the
Sarbanes-Oxley Act
of 2002
|
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|
|
|
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|
X |
|
|
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|
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|
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31.02
|
|
Certification of
Chief Financial
Officer pursuant to
Section 302 of the
Sarbanes-Oxley Act
of 2002
|
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|
|
|
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|
X |
|
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|
32.01
|
|
Certification of
Chief Executive
Officer pursuant to
Section 906 of the
Sarbanes-Oxley Act
of 2002
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
32.02
|
|
Certification of
Chief Financial
Officer pursuant to
Section 906 of the
Sarbanes-Oxley Act
of 2002
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
101
|
|
The following
materials from
Symantec
Corporations
Quarterly Report on
Form 10-Q for the
period ended
January 1, 2010,
formatted in XBRL
(Extensible
Business Reporting
Language): (i) the
Condensed
Consolidated
Balance Sheets,
(ii) the Condensed
Consolidated
Statements of
Operations, (iii)
the Condensed
Consolidated
Statements of Cash
Flows, and (iv) the
Notes to Condensed
Consolidated
Financial
Statements, tagged
as blocks of text.
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
* |
|
Indicates a management contract or compensatory plan or arrangement. |
|
|
|
This exhibit is being furnished rather than filed, and shall not be
deemed incorporated by reference into any filing, in accordance with
Item 601 of Regulation S-K. |
36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
|
|
SYMANTEC CORPORATION
(Registrant)
|
|
|
By: |
/s/ ENRIQUE SALEM
|
|
|
|
Enrique Salem |
|
|
|
President and Chief Executive Officer |
|
|
|
|
|
|
By: |
/s/ JAMES A. BEER
|
|
|
|
James A. Beer |
|
|
|
Executive Vice President and
Chief Financial Officer |
|
|
Date: February 3, 2010
37
SYMANTEC CORPORATION
Q3 FY10 Form 10-Q
EXHIBIT INDEX
|
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|
|
|
|
|
|
Incorporated by Reference |
|
|
Exhibit |
|
|
|
|
|
File |
|
|
|
File |
|
Filed with |
Number |
|
Exhibit Description |
|
Form |
|
Number |
|
Exhibit |
|
Date |
|
this 10-Q |
10.01*
|
|
Amendment to
the Symantec
Executive Retention
Plan
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
31.01
|
|
Certification of
Chief Executive
Officer pursuant to
Section 302 of the
Sarbanes-Oxley Act
of 2002
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
31.02
|
|
Certification of
Chief Financial
Officer pursuant to
Section 302 of the
Sarbanes-Oxley Act
of 2002
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
32.01
|
|
Certification of
Chief Executive
Officer pursuant to
Section 906 of the
Sarbanes-Oxley Act
of 2002
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
32.02
|
|
Certification of
Chief Financial
Officer pursuant to
Section 906 of the
Sarbanes-Oxley Act
of 2002
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
101
|
|
The following
materials from
Symantec
Corporations
Quarterly Report on
Form 10-Q for the
period ended
January 1, 2010,
formatted in XBRL
(Extensible
Business Reporting
Language): (i) the
Condensed
Consolidated
Balance Sheets,
(ii) the Condensed
Consolidated
Statements of
Operations, (iii)
the Condensed
Consolidated
Statements of Cash
Flows, and (iv) the
Notes to Condensed
Consolidated
Financial
Statements, tagged
as blocks of text.
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
* |
|
Indicates a management contract or compensatory plan or arrangement. |
|
|
|
This exhibit is being furnished rather than filed, and shall not be
deemed incorporated by reference into any filing, in accordance with
Item 601 of Regulation S-K. |
38