Exhibit 99.01
News Release
| | | |
FOR IMMEDIATE RELEASE | | |
CONTACT: | | |
| Melissa Martin | | Helyn Corcos |
| Symantec Corp. | | Symantec Corp. |
| 408-517-8475 | | 408-517-8324 |
Melissa_martin@symantec.com | | hcorcos@symantec.com |
Symantec Closes Fiscal Year 2008 with Record Revenue and Earnings
Results Driven by Strong Worldwide Sales Activity and Solid Execution
CUPERTINO, Calif. — April 30, 2008 —Symantec Corp. (Nasdaq: SYMC) today reported results of its fiscal fourth quarter and the fiscal year 2008, ended March 28, 2008. GAAP revenue for the March 2008 quarter was $1.540 billion and non-GAAP revenue was $1.548 billion, up 13 percent over the comparable period a year ago. For the fiscal year, GAAP revenue was $5.874 billion and non-GAAP revenue was $5.937 billion. On a non-GAAP basis, 2008 fiscal year revenue grew 13 percent compared to the 2007 fiscal year’s non-GAAP revenue of $5.253 billion.
GAAP operating margins for the March 2008 quarter were 13.9 percent and fiscal year 2008 GAAP operating margins were 10.3 percent. Non-GAAP operating margins for the March 2008 quarter were 27.8 percent, up 540 basis points year-over-year. Fiscal year 2008 non-GAAP operating margins were 26.6 percent, up approximately 100 basis points versus fiscal year 2007.
GAAP Results:GAAP net income for the fiscal fourth quarter was $186 million, compared to $61 million for the same quarter last year. GAAP diluted earnings per share were $0.22, compared to earnings per share of $0.07 for the same quarter last year. For fiscal year 2008, Symantec reported GAAP net income of $464 million, compared to net income of $404 million for fiscal year 2007. GAAP diluted earnings per share were $0.52, up 27 percent compared to earnings per share of $0.41 for fiscal year 2007.
Non-GAAP Results:Non-GAAP net income for fiscal fourth quarter was $309 million, compared to $227 million for the same quarter last year. Non-GAAP diluted earnings per share were $0.36, up 50 percent compared to earnings per share of $0.24 for the year ago quarter. For fiscal year 2008, Symantec reported non-GAAP net income of $1.127 billion, compared to $992 million in fiscal year 2007. Non-GAAP diluted earnings per share for the year were $1.27, up 26 percent compared to earnings per share of $1.01 for fiscal year 2007. For a detailed reconciliation of our GAAP to non-GAAP results, please refer to the attached consolidated financial statements.
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Symantec Closes Fiscal Year 2008 with Record Revenue and Earnings
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GAAP deferred revenue at the end of March 2008 was $3.077 billion. Non-GAAP deferred revenue grew 11 percent to $3.088 billion compared to $2.772 billion at the end of March 2007.
Cash flow from operating activities for the March 2008 quarter was $674 million, compared to $567 million for the March 2007 quarter. Cash flow from operating activities for fiscal year 2008 was $1.819 billion, up 9 percent compared to $1.666 billion for fiscal year 2007.
“Our team executed very well across the board and made significant progress in selling the broader portfolio of products and services to customers,” said John W. Thompson, chairman and chief executive officer, Symantec. “With the strongest product portfolio we’ve had in years and a solid pipeline, we are well positioned for a strong start and continued success in fiscal year 2009.”
Financial Highlights
For the quarter, Symantec’s Storage and Server Management segment represented 37 percent of total non-GAAP revenue and grew 11 percent year-over-year. The Consumer business represented 29 percent of total non-GAAP revenue and grew 10 percent year-over-year. The Security and Compliance segment represented 28 percent of total non-GAAP revenue and grew 21 percent year-over-year. Services represented 6 percent of total non-GAAP revenue and grew 12 percent year-over-year.
International revenues represented 53 percent of total non-GAAP revenue in the March 2008 quarter and grew 15 percent year-over-year. The Europe, Middle East and Africa region represented 34 percent of total non-GAAP revenue for the quarter and grew 17 percent year-over-year. The Asia Pacific/Japan revenue for the quarter represented 15 percent of total non-GAAP revenue and grew 19 percent year-over-year. The Americas, including the United States, Latin America and Canada, represented 51 percent of total non-GAAP revenue and increased 10 percent year-over-year.
June Quarter 2008 Guidance
For the June 2008 quarter, ending July 4, 2008, GAAP revenue is estimated between $1.550 billion and $1.590 billion. GAAP diluted earnings per share are estimated between $0.17 and $0.19.
Non-GAAP revenue for the quarter is estimated between $1.555 billion and $1.595 billion. Non-GAAP diluted earnings per share are estimated between $0.34 and $0.36.
GAAP deferred revenue is expected to be in the range of $2.905 billion and $3.005 billion. Non-GAAP deferred revenue is expected to be in the range of $2.910 billion and $3.010 billion.
Cash flow from operations is expected to exceed the June 2007 result of $351 million.
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Symantec Closes Fiscal Year 2008 with Record Revenue and Earnings
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Quarterly Highlights
| • | | Symantec signed 449 agreements worldwide versus 391 in the same period a year ago with a contract value of more than $300,000 each. Of the 449 agreements, 115 had a value of more than $1 million each versus 101 in the same period a year ago. In the March 2008 quarter, almost 80 percent of the large deals were multiple product deals. |
| • | | Symantec signed new or extended agreements with customers including theWashington State Department of Information Services, which provides technology leadership for government agencies throughout Washington;AgFirst Farm Credit Bank, which provides funding and financial services for 23 farmer-owned financial cooperatives in 15 eastern states and Puerto Rico;Provincial Health Services Authority,one of six health authorities in British Columbia;CanadaCarestream Health, formerly Eastman Kodak Company’s Health Group;Qualcomm Incorporated, a leading developer and innovator of advanced wireless technologies and data solutions;Gerdau S/A, the world’s 11th largest steelmaker and the largest producer of long steel in the Americas;MGM MIRAGE, an entertainment and development company with interest in more than 20 resort properties;LG N-Sys, a leading provider of systems and solutions in Korea;Sun Microsystems Ltd, the UK & Ireland division of the Global Technology Developer; andErsel,the Italian financial services company specializing in portfolio management and stock brokerage. |
Conference Call
Symantec has scheduled a conference call for 5 p.m. ET/2 p.m. PT today to discuss the results from the fiscal fourth quarter and fiscal year 2008 and to review guidance. Interested parties may access the conference call on the Internet athttp://www.symantec.com/invest. To listen to the live call, please go to the Web site at least 15 minutes early to register, download, and install any necessary audio software. A replay and script of our officers’ remarks will be available on the investor relations’ home page shortly after the call is completed.
About Symantec
Symantec is a global leader in providing security, storage and systems management solutions to help businesses and consumers secure and manage their information. Headquartered in Cupertino, Calif., Symantec has operations in more than 40 countries. More information is available atwww.symantec.com.
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NOTE TO EDITORS:If you would like additional information on Symantec Corporation and its products, please visit the Symantec News Room athttp://www.symantec.com/news. All prices noted are in U.S. dollars and are valid only in the United States.
Symantec and the Symantec Logo are trademarks or registered trademarks of Symantec Corporation or its affiliates in the U.S. and other countries. Other names may be trademarks of their respective owners.
Symantec Closes Fiscal Year 2008 with Record Revenue and Earnings
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FORWARD-LOOKING STATEMENTS:This press release contains statements regarding our financial and business results, which may be considered forward-looking within the meaning of the U.S. federal securities laws, including statements relating to projections of future revenue, earnings per share, deferred revenue and cash flow from operations, as well as projections of amortization of acquisition-related intangibles and stock-based compensation and restructuring charges. These statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from results expressed or implied in this press release. Such risk factors include those related to: maintaining customer and partner relationships; the anticipated growth of certain market segments, particularly with regard to security and storage; the competitive environment in the software industry; changes to operating systems and product strategy by vendors of operating systems; fluctuations in currency exchange rates; the timing and market acceptance of new product releases and upgrades; the successful development of new products and integration of acquired businesses, and the degree to which these products and businesses gain market acceptance. Actual results may differ materially from those contained in the forward-looking statements in this press release. Additional information concerning these and other risk factors is contained in the Risk Factors section of our Form 10-K for the year ended March 30, 2007.
USE OF NON-GAAP FINANCIAL INFORMATION:Our results of operations have undergone significant change due to a series of acquisitions, the impact of SFAS 123(R) and other corporate events. To help our readers understand our past financial performance and our future results, we supplement the financial results that we provide in accordance with generally accepted accounting principles, or GAAP, with non-GAAP financial measures. The method we use to produce non-GAAP results is not computed according to GAAP and may differ from the methods used by other companies. Our non-GAAP results are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Investors are encouraged to review the reconciliation of our non-GAAP financial measures to the comparable GAAP results, which is attached to our quarterly earnings release and which can be found, along with other financial information, on the investor relations page of our Web site atwww.symantec.com/invest.
SYMANTEC CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)
| | | | | | | | | |
| | | March 31, | |
| | | 2008 | | | 2007 | |
| | | (Unaudited) | | | | | |
ASSETS | | | | | | | | |
| Current assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 1,890,225 | | | $ | 2,559,034 | |
| Short-term investments | | | 536,728 | | | | 428,619 | |
| Trade accounts receivable, net | | | 758,200 | | | | 666,968 | |
| Inventories | | | 34,138 | | | | 42,183 | |
| Current deferred income taxes | | | 193,775 | | | | 165,323 | |
| Other current assets | | | 316,852 | | | | 208,920 | |
| | | | | | | |
| Total current assets | | | 3,729,918 | | | | 4,071,047 | |
| Property and equipment, net | | | 1,001,750 | | | | 1,092,240 | |
| Acquired product rights, net | | | 648,950 | | | | 909,878 | |
| Other intangible assets, net | | | 1,243,524 | | | | 1,245,638 | |
| Goodwill | | | 11,207,357 | | | | 10,340,348 | |
| Investment in joint venture | | | 150,000 | | | | — | |
| Other long-term assets | | | 55,291 | | | | 63,987 | |
| Long-term deferred income taxes | | | 55,304 | | | | 27,732 | |
| | | | | | | |
| Total assets | | $ | 18,092,094 | | | $ | 17,750,870 | |
| | | | | | | |
| | | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 169,631 | | | $ | 149,131 | |
| Accrued compensation and benefits | | | 431,345 | | | | 307,824 | |
| Current deferred revenue | | | 2,661,515 | | | | 2,387,733 | |
| Other current liabilities | | | 264,832 | | | | 234,915 | |
| Income taxes payable | | | 72,263 | | | | 238,486 | |
| Short-term borrowing | | | 200,000 | | | | — | |
| | | | | | | |
| Total current liabilities | | | 3,799,586 | | | | 3,318,089 | |
| Convertible senior notes | | | 2,100,000 | | | | 2,100,000 | |
| Long-term deferred revenue | | | 415,054 | | | | 366,050 | |
| Long-term deferred tax liabilities | | | 219,341 | | | | 343,848 | |
| Long-term income taxes payable | | | 478,743 | | | | — | |
| Other long-term liabilities | | | 106,187 | | | | 21,370 | |
| | | | | | | |
| Total liabilities | | | 7,118,911 | | | | 6,149,357 | |
| Stockholders’ equity: | | | | | | | | |
| Common stock | | | 8,393 | | | | 8,994 | |
| Additional paid-in capital | | | 9,139,084 | | | | 10,061,144 | |
| Accumulated other comprehensive income | | | 159,792 | | | | 182,933 | |
| Retained earnings | | | 1,665,914 | | | | 1,348,442 | |
| | | | | | | |
| Total stockholders’ equity | | | 10,973,183 | | | | 11,601,513 | |
| | | | | | | |
| Total liabilities and stockholders’ equity | | $ | 18,092,094 | | | $ | 17,750,870 | |
| | | | | | | |
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SYMANTEC CORPORATION
Condensed Consolidated Statements of Income
(In thousands, except earnings per share data)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Year Ended | |
| | | March 31, | | | March 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| | | (Unaudited) | | | (Unaudited) | | | | | |
| Net revenues: | | | | | | | | | | | | | | | | |
| Content, subscriptions, and maintenance | | $ | 1,190,440 | | | $ | 1,051,112 | | | $ | 4,561,566 | | | $ | 3,917,572 | |
| Licenses | | | 349,301 | | | | 306,105 | | | | 1,312,853 | | | | 1,281,794 | |
| | | | | | | | | | | | | |
| Total net revenues | | | 1,539,741 | | | | 1,357,217 | | | | 5,874,419 | | | | 5,199,366 | |
| Cost of revenues: | | | | | | | | | | | | | | | | |
| Content, subscriptions, and maintenance | | | 206,746 | | | | 210,888 | | | | 826,339 | | | | 823,525 | |
| Licenses | | | 13,230 | | | | 10,502 | | | | 44,664 | | | | 49,968 | |
| Amortization of acquired product rights | | | 86,403 | | | | 84,873 | | | | 349,327 | | | | 342,333 | |
| | | | | | | | | | | | | |
| Total cost of revenues | | | 306,379 | | | | 306,263 | | | | 1,220,330 | | | | 1,215,826 | |
| | | | | | | | | | | | | |
| Gross profit | | | 1,233,362 | | | | 1,050,954 | | | | 4,654,089 | | | | 3,983,540 | |
| Operating expenses: | | | | | | | | | | | | | | | | |
| Sales and marketing | | | 623,592 | | | | 575,546 | | | | 2,415,264 | | | | 2,007,651 | |
| Research and development | | | 223,314 | | | | 218,468 | | | | 895,242 | | | | 866,882 | |
| General and administrative | | | 92,792 | | | | 79,266 | | | | 347,642 | | | | 316,783 | |
| Amortization of other purchased intangible assets | | | 56,284 | | | | 49,932 | | | | 225,131 | | | | 201,502 | |
| Restructuring | | | 22,031 | | | | 50,758 | | | | 73,914 | | | | 70,236 | |
| Integration | | | — | | | | 744 | | | | — | | | | 744 | |
| Loss on sale of assets | | | 1,928 | | | | — | | | | 94,616 | | | | — | |
| | | | | | | | | | | | | |
| Total operating expenses | | | 1,019,941 | | | | 974,714 | | | | 4,051,809 | | | | 3,463,798 | |
| | | | | | | | | | | | | |
| Operating income | | | 213,421 | | | | 76,240 | | | | 602,280 | | | | 519,742 | |
| Interest income | | | 16,899 | | | | 30,503 | | | | 76,896 | | | | 122,043 | |
| Interest expense | | | (9,095 | ) | | | (6,246 | ) | | | (29,480 | ) | | | (27,233 | ) |
| Settlements of litigation | | | 58,500 | | | | — | | | | 58,500 | | | | — | |
| Other income (expense), net | | | 3,444 | | | | 5,568 | | | | 4,327 | | | | 17,070 | |
| | | | | | | | | | | | | |
| Income before income taxes | | | 283,169 | | | | 106,065 | | | | 712,523 | | | | 631,622 | |
| Provision for income taxes | | | 96,783 | | | | 45,171 | | | | 248,673 | | | | 227,242 | |
| | | | | | | | | | | | | |
| Net income | | $ | 186,386 | | | $ | 60,894 | | | $ | 463,850 | | | $ | 404,380 | |
| | | | | | | | | | | | | |
| Earnings per share — basic | | $ | 0.22 | | | $ | 0.07 | | | $ | 0.53 | | | $ | 0.42 | |
| | | | | | | | | | | | | |
| Earnings per share — diluted | | $ | 0.22 | | | $ | 0.07 | | | $ | 0.52 | | | $ | 0.41 | |
| | | | | | | | | | | | | |
| Weighted-average shares outstanding — basic | | | 842,432 | | | | 914,601 | | | | 867,562 | | | | 960,575 | |
| | | | | | | | | | | | | |
| Weighted-average shares outstanding — diluted | | | 856,747 | | | | 932,985 | | | | 884,136 | | | | 983,261 | |
| | | | | | | | | | | | | |
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SYMANTEC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| | | | | | | | | |
| | | Year Ended March 31, | |
| | | 2008 | | | 2007 | |
| | | (Unaudited) | | | | | |
OPERATING ACTIVITIES: | | | | | | | | |
| Net income | | $ | 463,850 | | | $ | 404,380 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 824,109 | | | | 811,443 | |
| Stock-based compensation expense | | | 163,695 | | | | 153,880 | |
| Impairment of equity investments | | | 1,000 | | | | 2,841 | |
| Write-down of assets | | | 1,200 | | | | — | |
| Deferred income taxes | | | (180,215 | ) | | | 11,173 | |
| Income tax benefit from the exercise of stock options | | | 29,443 | | | | 43,118 | |
| Excess income tax benefit from the exercise of stock options | | | (26,151 | ) | | | (25,539 | ) |
| Loss (gain) on sale of assets | | | 97,463 | | | | (19,937 | ) |
| Net (gain) on settlements of litigation | | | (58,500 | ) | | | — | |
| Other | | | (894 | ) | | | 912 | |
| Net change in assets and liabilities, excluding effects of acquisitions: | | | | | | | | |
| Trade accounts receivable, net | | | (7,002 | ) | | | 33,714 | |
| Inventories | | | 10,791 | | | | 10,324 | |
| Accounts payable | | | 667 | | | | (25,623 | ) |
| Accrued compensation and benefits | | | 97,133 | | | | 23,169 | |
| Deferred revenue | | | 126,716 | | | | 399,517 | |
| Income taxes payable | | | 150,919 | | | | (181,926 | ) |
| Other | | | 124,429 | | | | 24,789 | |
| | | | | | | |
| Net cash provided by operating activities | | | 1,818,653 | | | | 1,666,235 | |
INVESTING ACTIVITIES: | | | | | | | | |
| Purchase of property and equipment | | | (273,807 | ) | | | (419,749 | ) |
| Proceeds from sale of property and equipment | | | 104,715 | | | | 121,464 | |
| Purchase of intangible assets | | | — | | | | (13,300 | ) |
| Cash payments for business acquisitions, net of cash and cash equivalents acquired | | | (1,162,455 | ) | | | (33,373 | ) |
| Investment in Joint Venture | | | (150,000 | ) | | | — | |
| Purchases of available-for-sale securities | | | (1,233,954 | ) | | | (226,905 | ) |
| Proceeds from sales of available-for-sale securities | | | 1,189,283 | | | | 349,408 | |
| | | | | | | |
| Net cash used in (provided by) investing activities | | | (1,526,218 | ) | | | (222,455 | ) |
FINANCING ACTIVITIES: | | | | | | | | |
| Sale of common stock warrants | | | — | | | | 326,102 | |
| Repurchase of common stock | | | (1,499,995 | ) | | | (2,846,312 | ) |
| Net proceeds from sales of common stock under employee stock benefit plans | | | 224,152 | | | | 230,295 | |
| Proceeds from debt issuance | | | — | | | | 2,067,299 | |
| Purchase of bond hedge | | | — | | | | (592,490 | ) |
| Proceeds from short-term borrowing | | | 200,000 | | | | — | |
| Excess income tax benefit from the exercise of stock options | | | 26,151 | | | | 25,539 | |
| Repayment of other long-term liability | | | (11,724 | ) | | | (520,000 | ) |
| Tax payments related to restricted stock issuance | | | (4,137 | ) | | | — | |
| | | | | | | |
| Net cash used in financing activities | | | (1,065,553 | ) | | | (1,309,567 | ) |
| Effect of exchange rate fluctuations on cash and cash equivalents | | | 104,309 | | | | 109,199 | |
| | | | | | | |
| (Decrease) increase in cash and cash equivalents | | | (668,809 | ) | | | 243,412 | |
| Beginning cash and cash equivalents | | | 2,559,034 | | | | 2,315,622 | |
| | | | | | | |
| Ending cash and cash equivalents | | $ | 1,890,225 | | | $ | 2,559,034 | |
| | | | | | | |
| | | | | | | | | |
Supplemental schedule of non-cash transactions: | | | | | | | | |
| Fair value of options assumed, restricted stock awards and restricted stock units in connection with acquisitions | | $ | 35,054 | | | $ | — | |
Supplemental cash flow disclosures: | | | | | | | | |
| Income taxes paid (net of refunds) during the year | | $ | 181,089 | | | $ | 384,771 | |
| Interest expense paid during the year | | $ | 22,659 | | | $ | 10,108 | |
7
Symantec Corporation
Reconciliation of Non-GAAP Adjustments
Statements of Operations
(In thousands, except per share data)
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Year Ended | |
| | | March 31, | | | March 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| NET REVENUES: | | | | | | | | | | | | | | | | |
| GAAP net revenues | | $ | 1,539,741 | | | $ | 1,357,217 | | | $ | 5,874,419 | | | $ | 5,199,366 | |
Deferred revenue related to acquisitions(1) | | | 8,246 | | | | 7,565 | | | | 62,770 | | | | 53,298 | |
| | | | | | | | | | | | | |
| Non-GAAP net revenues | | $ | 1,547,987 | | | $ | 1,364,782 | | | $ | 5,937,189 | | | $ | 5,252,664 | |
| | | | | | | | | | | | | |
| |
| GROSS PROFIT: | | | | | | | | | | | | | | | | |
| GAAP gross profit | | $ | 1,233,362 | | | $ | 1,050,954 | | | $ | 4,654,089 | | | $ | 3,983,540 | |
Deferred revenue related to acquisitions(1) | | | 8,246 | | | | 7,565 | | | | 62,770 | | | | 53,298 | |
Stock-based compensation(2) | | | 3,960 | | | | 3,454 | | | | 16,734 | | | | 16,437 | |
Amortization of acquired product rights(3) | | | 86,403 | | | | 84,873 | | | | 349,327 | | | | 342,333 | |
| | | | | | | | | | | | | |
| Gross profit adjustment | | | 98,609 | | | | 95,892 | | | | 428,831 | | | | 412,068 | |
| | | | | | | | | | | | | |
| Non-GAAP gross profit | | $ | 1,331,971 | | | $ | 1,146,846 | | | $ | 5,082,920 | | | $ | 4,395,608 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| OPERATING EXPENSES: | | | | | | | | | | | | | | | | |
| GAAP operating expenses | | $ | 1,019,941 | | | $ | 974,714 | | | $ | 4,051,809 | | | $ | 3,463,798 | |
Stock-based compensation(2) | | | (38,582 | ) | | | (31,639 | ) | | | (146,961 | ) | | | (137,403 | ) |
Amortization of other intangible assets(3) | | | (56,284 | ) | | | (49,932 | ) | | | (225,131 | ) | | | (201,502 | ) |
Restructuring(4) | | | (22,031 | ) | | | (50,758 | ) | | | (73,914 | ) | | | (70,236 | ) |
Write-down of assets(5) | | | — | | | | — | | | | (1,200 | ) | | | — | |
Loss on sale of assets(6) | | | (1,928 | ) | | | — | | | | (94,616 | ) | | | — | |
Executive incentive bonuses(7) | | | 104 | | | | — | | | | (3,436 | ) | | | (3,995 | ) |
Integration (8) | | | — | | | | (744 | ) | | | (441 | ) | | | (744 | ) |
| | | | | | | | | | | | | |
| Operating expense adjustment | | | (118,721 | ) | | | (133,073 | ) | | | (545,699 | ) | | | (413,880 | ) |
| | | | | | | | | | | | | |
| Non-GAAP operating expenses | | $ | 901,220 | | | $ | 841,641 | | | $ | 3,506,110 | | | $ | 3,049,918 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| OPERATING INCOME: | | | | | | | | | | | | | | | | |
| GAAP operating income | | $ | 213,421 | | | $ | 76,240 | | | $ | 602,280 | | | $ | 519,742 | |
| Gross profit adjustment | | | 98,609 | | | | 95,892 | | | | 428,831 | | | | 412,068 | |
| Operating expense adjustment | | | 118,721 | | | | 133,073 | | | | 545,699 | | | | 413,880 | |
| | | | | | | | | | | | | |
| Non-GAAP operating income | | $ | 430,751 | | | $ | 305,205 | | | $ | 1,576,810 | | | $ | 1,345,690 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| NET INCOME: | | | | | | | | | | | | | | | | |
| GAAP net income | | $ | 186,386 | | | $ | 60,894 | | | $ | 463,850 | | | $ | 404,380 | |
| Gross profit adjustment | | | 98,609 | | | | 95,892 | | | | 428,831 | | | | 412,068 | |
| Operating expense adjustment | | | 118,721 | | | | 133,073 | | | | 545,699 | | | | 413,880 | |
Gain on sale of assets(9) | | | — | | | | (3,223 | ) | | | (3,277 | ) | | | (19,988 | ) |
Settlements of litigation (10) | | | (58,500 | ) | | | — | | | | (58,500 | ) | | | — | |
Income tax effect on above items(11) | | | (35,786 | ) | | | (59,869 | ) | | | (250,092 | ) | | | (217,863 | ) |
| | | | | | | | | | | | | |
| Non-GAAP net income | | $ | 309,430 | | | $ | 226,767 | | | $ | 1,126,511 | | | $ | 992,477 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| EARNINGS PER SHARE — DILUTED: | | | | | | | | | | | | | | | | |
| GAAP earnings per share | | $ | 0.22 | | | $ | 0.07 | | | $ | 0.52 | | | $ | 0.41 | |
Stock-based compensation adjustment per share, net of tax(2) | | | 0.04 | | | | 0.03 | | | | 0.14 | | | | 0.12 | |
Other non-GAAP adjustments per share, net of tax(1, 3-10) | | | 0.10 | | | | 0.14 | | | | 0.61 | | | | 0.48 | |
| | | | | | | | | | | | | |
| Non-GAAP earnings per share | | $ | 0.36 | | | $ | 0.24 | | | $ | 1.27 | | | $ | 1.01 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| WEIGHTED-AVERAGE SHARES OUTSTANDING — DILUTED: | | | | | | | | | | | | | | | | |
| GAAP weighted-average shares outstanding | | | 856,747 | | | | 932,985 | | | | 884,136 | | | | 983,261 | |
| | | | | | | | | | | | | |
The non-GAAP financial measures included in the tables above are non-GAAP net revenues, non-GAAP net income and non-GAAP earnings per share, which adjust for the following items: business combination accounting entries, stock-based compensation expense, restructuring charges, charges related to the amortization of intangible assets, litigation settlements, write-downs of assets and certain other items. We believe the presentation of these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provides meaningful supplemental information regarding the Company’s operating performance for the reasons discussed below. Our management uses these non-GAAP financial measures in assessing the Company’s operating results, as well as when planning, forecasting and analyzing future periods. We believe that these non-GAAP financial measures also facilitate comparisons of the Company’s performance to prior periods and to our peers and that investors benefit from an understanding of these non-GAAP financial measures.
| | |
| (1) | | Fair value adjustment to deferred revenue. We have completed numerous business combinations and acquisitions for a variety of strategic purposes over the past several years. As is the case with our existing business, at the time of acquisition, these acquired businesses recorded deferred revenue related to past transactions for which revenue would be recognized in future periods as revenue recognition criteria are satisfied. The purchase accounting entries for these acquisitions require us to write down a portion of this deferred revenue to its then current fair value. Consequently, in post acquisition periods, we do not recognize the full amount of this deferred revenue. When measuring the |
8
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| | | performance of our business, however, we add back non-GAAP revenue associated with certain types of deferred revenue that were excluded as a result of these purchase accounting adjustments, as we believe that this provides information about the operating impact of the acquired businesses in a manner consistent with the revenue recognition for our pre-existing products and services. We believe that the inclusion of this revenue provides useful information to our management as well as to investors. |
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| (2) | | Stock-based compensation.Consists of expenses for employee stock options, restricted stock units, restricted stock awards and our employee stock purchase plan determined in accordance with Statement of Financial Accounting Standards Number 123(R), or SFAS 123(R). When evaluating the performance of our individual business units and developing short and long term plans, we do not consider stock-based compensation charges. Our management team is held accountable for cash-based compensation, but we believe that management is limited in its ability to project the impact of stock-based compensation and accordingly is not held accountable for its impact on our operating results. Although stock-based compensation is necessary to attract and retain quality employees, our consideration of stock based compensation places its primary emphasis on overall shareholder dilution rather than the accounting charges associated with such grants. In addition, for comparability purposes, we believe it is useful to provide a non-GAAP financial measure that excludes stock-based compensation in order to better understand the long-term performance of our core business and to facilitate the comparison of our results to the results of our peer companies. Furthermore, unlike cash compensation, the value of stock-based compensation is determined using a complex formula that incorporates factors, such as market volatility, that are beyond our control. Further, we believe it is useful to investors to understand the impact of SFAS 123(R) to our results of operations. For the three months and twelve months ended March 31, 2008 and 2007, respectively, stock-based compensation was allocated as follows: |
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Year Ended | |
| | | March 31, | | | March 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Cost of revenues | | $ | 3,960 | | | $ | 3,454 | | | $ | 16,734 | | | $ | 16,437 | |
| Sales and marketing | | | 15,748 | | | | 12,084 | | | | 58,181 | | | | 55,855 | |
| Research and development | | | 14,158 | | | | 12,325 | | | | 57,597 | | | | 57,132 | |
| General and administrative | | | 8,676 | | | | 7,230 | | | | 31,183 | | | | 24,416 | |
| | | | | | | | | | | | | |
| Total stock based compensation | | $ | 42,542 | | | $ | 35,093 | | | $ | 163,695 | | | $ | 153,840 | |
| | | | | | | | | | | | | |
| | |
| (3) | | Amortization of acquired product rights and other intangible assets.When conducting internal development of intangible assets, accounting rules require that we expense the costs as incurred. In the case of acquired businesses, however, we are required to allocate a portion of the purchase price to the accounting value assigned to intangible assets acquired and amortize this amount over the estimated useful lives of the acquired intangibles. The acquired company, in most cases, has itself previously expensed the costs incurred to develop the acquired intangible assets, and the purchase price allocated to these assets is not necessarily reflective of the cost we would incur in developing the intangible asset. We eliminate this amortization charge from our non-GAAP operating results to provide better comparability of pre and post-acquisition operating results and comparability to results of businesses utilizing internally developed intangible assets. |
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| (4) | | Restructuring.We have engaged in various restructuring activities over the past several years that have resulted in costs associated with severance, benefits, outplacement services, and excess facilities. Each restructuring has been a discrete event based on a unique set of business objectives or circumstances, and each has differed from the others in terms of its operational implementation, business impact and scope. We do not engage in restructuring activities in the ordinary course of business. While our operations previously benefited from the employees and facilities covered by our various restructuring charges, these employees and facilities have benefited different parts of our business in different ways, and the amount of these charges has varied significantly from period to period. We believe that it is important to understand these charges; however, we do not believe that these charges are indicative of future operating results and that investors benefit from an understanding of our operating results without giving effect to them. |
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| (5) | | Write-down of assets. During the December 2007 quarter, we recorded a $1.2 million write-down on a facility classified as held for sale. |
| |
| (6) | | Loss on sale of assets.During the September 2007 quarter, management determined that certain tangible and intangible assets and liabilities of the Storage and Server Management segment (formally the Data Center Management segment) did not meet the long term strategic objectives of the segment, and we recorded a write-down of $87 million to value these assets and liabilities at the respective estimated fair value. We adjusted this amount to $93 million in the December 2007 quarter and to $95 million in the March 2008 quarter. On March 8, 2008 these assets were sold to a third party. |
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| (7) | | Executive incentive bonuses.We have excluded bonuses related to acquisitions and executive sign-on bonuses for newly hired executives. We expect the benefit from these hires and retentions to extend over an indeterminate future period, but under GAAP we are required to expense the entire cost of the bonus in the period paid. We exclude these amounts to provide better comparability of the periods that include and do not include these charges. We believe that investors benefit from an understanding of our operating results for the periods presented without giving effect to these charges. |
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| (8) | | Integration.These charges consist of expenses incurred for consulting services and other professional fees associated with integration activities of acquisitions. Because these expenses are non-recurring and unique to specific acquisitions, we believe they are not indicative of future operating results and that investors benefit from an understanding of our operating results without giving effect to them. |
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| (9) | | Gain on sale of assets.We exclude these gains because each is a unique one-time occurrence that is not closely related to, or a function of, our ongoing operations. |
| |
| (10) | | Settlements of litigation.This gain represents the net effect of a charge incurred from our settlements of litigation that was pending against Veritas when we acquired it in July 2005 and a gain from our settlement of certain intellectual property-related matters. We exclude the impact of these settlements because we do not consider the defense and prosecution of these pieces of litigation to be part of the ongoing operation of our business and because of the singular nature of the claims underlying each matter. |
| |
| (11) | | Income tax effect on above items.This amount adjusts the provision for income taxes to reflect the effect of the non-GAAP adjustments on non-GAAP net income. |
9
SYMANTEC CORPORATION
Reconciliation of GAAP Revenue Components to Non-GAAP Revenue Components
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | FY 2008 | | Three Months Ended Mar 31, 2008 | | Three Months Ended Dec 31, 2007 | | Three Months Ended Sep 30, 2007 | | Three Months Ended Jun 30, 2007 |
| | | Non-GAAP | | Non-GAAP | | Non-GAAP | | Non-GAAP | | Non-GAAP |
| | | GAAP | | Adjustments(1) | | Non-GAAP | | GAAP | | Adjustments(1) | | Non-GAAP | | GAAP | | Adjustments(1) | | Non-GAAP | | GAAP | | Adjustments(1) | | Non-GAAP | | GAAP | | Adjustments(1) | | Non-GAAP |
| | | | | | | | | | | |
Net Revenues | | $ | 5,874,419 | | | $ | 62,770 | | | $ | 5,937,189 | | | $ | 1,539,741 | | | $ | 8,246 | | | $ | 1,547,987 | | | $ | 1,515,251 | | | $ | 13,775 | | | $ | 1,529,026 | | | $ | 1,419,089 | | | $ | 18,243 | | | $ | 1,437,332 | | | $ | 1,400,338 | | | $ | 22,506 | | | $ | 1,422,844 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenue by Segment(2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Security & Compliance Group | | $ | 1,630,133 | | | $ | 47,382 | | | $ | 1,677,515 | | | $ | 432,559 | | | $ | 6,410 | | | $ | 438,969 | | | $ | 416,666 | | | $ | 10,315 | | | $ | 426,981 | | | $ | 391,287 | | | $ | 13,845 | | | $ | 405,132 | | | $ | 389,621 | | | $ | 16,812 | | | $ | 406,433 | |
| Storage and Server Management Group | | | 2,136,307 | | | | 15,386 | | | | 2,151,693 | | | | 561,076 | | | | 1,834 | | | | 562,910 | | | | 561,695 | | | | 3,460 | | | | 565,155 | | | | 507,956 | | | | 4,398 | | | | 512,354 | | | | 505,580 | | | | 5,694 | | | | 511,274 | |
| Consumer | | | 1,746,089 | | | | — | | | | 1,746,089 | | | | 448,625 | | | | — | | | | 448,625 | | | | 440,206 | | | | — | | | | 440,206 | | | | 433,508 | | | | — | | | | 433,508 | | | | 423,750 | | | | — | | | | 423,750 | |
| Services | | | 359,955 | | | | — | | | | 359,955 | | | | 96,610 | | | | — | | | | 96,610 | | | | 96,189 | | | | — | | | | 96,189 | | | | 86,010 | | | | — | | | | 86,010 | | | | 81,146 | | | | — | | | | 81,146 | |
Other(3) | | $ | 1,935 | | | $ | 2 | | | $ | 1,937 | | | $ | 871 | | | $ | 2 | | | $ | 873 | | | $ | 495 | | | $ | — | | | $ | 495 | | | $ | 328 | | | $ | — | | | $ | 328 | | | $ | 241 | | | $ | — | | | $ | 241 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenue by Geography: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Americas(4) | | $ | 3,095,492 | | | $ | 42,482 | | | $ | 3,137,974 | | | $ | 799,756 | | | $ | 6,051 | | | $ | 805,807 | | | $ | 779,817 | | | $ | 9,258 | | | $ | 789,075 | | | $ | 764,470 | | | $ | 12,222 | | | $ | 776,692 | | | $ | 751,449 | | | $ | 14,951 | | | $ | 766,400 | |
| EMEA | | | 1,963,319 | | | | 17,349 | | | | 1,980,668 | | | | 520,049 | | | | 1,794 | | | | 521,843 | | | | 524,981 | | | | 3,879 | | | | 528,860 | | | | 460,485 | | | | 5,191 | | | | 465,676 | | | | 457,804 | | | | 6,485 | | | | 464,289 | |
| Asia Pacific/Japan | | $ | 815,608 | | | $ | 2,939 | | | $ | 818,547 | | | $ | 219,936 | | | $ | 401 | | | $ | 220,337 | | | $ | 210,453 | | | $ | 638 | | | $ | 211,091 | | | $ | 194,134 | | | $ | 830 | | | $ | 194,964 | | | $ | 191,085 | | | $ | 1,070 | | | $ | 192,155 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total U.S. Revenue | | $ | 2,814,444 | | | $ | 41,783 | | | $ | 2,856,227 | | | $ | 729,095 | | | $ | 5,980 | | | $ | 735,075 | | | $ | 708,186 | | | $ | 9,080 | | | $ | 717,266 | | | $ | 695,517 | | | $ | 12,027 | | | $ | 707,544 | | | $ | 681,646 | | | $ | 14,696 | | | $ | 696,342 | |
| Total International Revenue | | $ | 3,059,975 | | | $ | 20,987 | | | $ | 3,080,962 | | | $ | 810,646 | | | $ | 2,266 | | | $ | 812,912 | | | $ | 807,065 | | | $ | 4,695 | | | $ | 811,760 | | | $ | 723,572 | | | $ | 6,216 | | | $ | 729,788 | | | $ | 718,692 | | | $ | 7,810 | | | $ | 726,502 | |
SYMANTEC CORPORATION
Reconciliation of GAAP Revenue
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | FY 2007 | | Three Months Ended Mar 31, 2007 | | Three Months Ended Dec 31, 2006 | | Three Months Ended Sep 30, 2006 | | Three Months Ended Jun 30, 2006 |
| | | Non-GAAP | | Non-GAAP | | Non-GAAP | | Non-GAAP | | Non-GAAP |
| | | GAAP | | Adjustments(1) | | Non-GAAP | | GAAP | | Adjustments(1) | | Non-GAAP | | GAAP | | Adjustments(1) | | Non-GAAP | | GAAP | | Adjustments(1) | | Non-GAAP | | GAAP | | Adjustments(1) | | Non-GAAP |
| | | | | | | | | | | |
Net Revenues | | $ | 5,199,366 | | | $ | 53,298 | | | $ | 5,252,664 | | | $ | 1,357,217 | | | $ | 7,565 | | | $ | 1,364,782 | | | $ | 1,315,873 | | | $ | 10,468 | | | $ | 1,326,341 | | | $ | 1,260,408 | | | $ | 12,984 | | | $ | 1,273,392 | | | $ | 1,265,868 | | | $ | 22,281 | | | $ | 1,288,149 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenue By Segment:(2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Security & Compliance Group | | $ | 1,408,906 | | | $ | 3,779 | | | $ | 1,412,685 | | | $ | 360,722 | | | $ | 572 | | | $ | 361,294 | | | $ | 361,467 | | | $ | 823 | | | $ | 362,290 | | | $ | 340,452 | | | $ | 948 | | | $ | 341,400 | | | $ | 346,265 | | | $ | 1,436 | | | $ | 347,701 | |
| Storage and Server Management Group | | | 1,906,607 | | | | 49,317 | | | | 1,955,924 | | | | 501,790 | | | | 6,993 | | | | 508,783 | | | | 479,758 | | | | 9,645 | | | | 489,403 | | | | 459,151 | | | | 12,036 | | | | 471,187 | | | | 465,908 | | | | 20,643 | | | | 486,551 | |
| Consumer | | | 1,590,505 | | | | — | | | | 1,590,505 | | | | 408,200 | | | | — | | | | 408,200 | | | | 406,145 | | | | — | | | | 406,145 | | | | 394,382 | | | | — | | | | 394,382 | | | | 381,778 | | | | — | | | | 381,778 | |
| Services | | | 293,226 | | | | 202 | | | | 293,428 | | | | 86,439 | | | | — | | | | 86,439 | | | | 68,517 | | | | — | | | | 68,517 | | | | 66,356 | | | | — | | | | 66,356 | | | | 71,914 | | | | 202 | | | | 72,116 | |
Other (3) | | $ | 122 | | | $ | — | | | $ | 122 | | | $ | 66 | | | $ | — | | | $ | 66 | | | $ | (14 | ) | | $ | — | | | $ | (14 | ) | | $ | 67 | | | $ | — | | | $ | 67 | | | $ | 3 | | | $ | — | | | $ | 3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenue by Geography: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Americas(4) | | $ | 2,840,570 | | | $ | 35,495 | | | $ | 2,876,065 | | | $ | 729,747 | | | $ | 4,711 | | | $ | 734,458 | | | $ | 720,611 | | | $ | 6,832 | | | $ | 727,443 | | | $ | 696,367 | | | $ | 9,071 | | | $ | 705,438 | | | $ | 693,845 | | | $ | 14,881 | | | $ | 708,726 | |
| EMEA | | | 1,644,177 | | | | 13,244 | | | | 1,657,421 | | | | 442,395 | | | | 2,339 | | | | 444,734 | | | | 417,813 | | | | 2,987 | | | | 420,800 | | | | 386,422 | | | | 3,166 | | | | 389,588 | | | | 397,547 | | | | 4,752 | | | | 402,299 | |
| Asia Pacific/Japan | | $ | 714,619 | | | $ | 4,559 | | | $ | 719,178 | | | $ | 185,075 | | | $ | 515 | | | $ | 185,590 | | | $ | 177,449 | | | $ | 649 | | | $ | 178,098 | | | $ | 177,619 | | | $ | 747 | | | $ | 178,366 | | | $ | 174,476 | | | $ | 2,648 | | | $ | 177,124 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total U.S. Revenue | | $ | 2,560,194 | | | $ | 33,403 | | | $ | 2,593,597 | | | $ | 654,748 | | | $ | 4,401 | | | $ | 659,149 | | | $ | 650,721 | | | $ | 6,467 | | | $ | 657,188 | | | $ | 628,614 | | | $ | 8,659 | | | $ | 637,273 | | | $ | 626,111 | | | $ | 13,876 | | | $ | 639,987 | |
| Total International Revenue | | $ | 2,639,172 | | | $ | 19,895 | | | $ | 2,659,067 | | | $ | 702,469 | | | $ | 3,164 | | | $ | 705,633 | | | $ | 665,152 | | | $ | 4,001 | | | $ | 669,153 | | | $ | 631,794 | | | $ | 4,325 | | | $ | 636,119 | | | $ | 639,757 | | | $ | 8,405 | | | $ | 648,162 | |
We include certain non-GAAP revenue and deferred revenue components in the tracking and forecasting of our revenue and management of our business. This includes non-GAAP revenue associated with deferred revenue that was excluded as a result of purchase accounting adjustments related to acquisitions. We believe the non-GAAP revenue measures set forth above are useful to investors, and such items are used by our management, because this revenue is reflective of our ongoing operating results.
| | |
| (1) | | We have completed numerous business combinations and acquisitions for a variety of strategic purposes over the past several years. As is the case with our existing business, at the time of acquisition, acquired business had recorded deferred revenue related to past transactions for which revenue would be recognized in future periods as revenue recognition criteria are satisfied. The purchase accounting entries for these acquisitions require us to write down a portion of this deferred revenue to its then current fair value. Consequently, in post acquisition periods, we do not recognize the full amount of this deferred revenue. When measuring the performance of our business, however, we add back non-GAAP revenue associated with certain types of deferred revenue that were excluded as a result of these purchase accounting adjustments, as we believe that this provides information about the operating impact of the acquired businesses in a manner consistent with the revenue recognition for our for our pre-existing products and services. We believe that the inclusion of this revenue provides useful information to our management as well as to investors. |
10
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| (2) | | During the March 2008 quarter, we modified the segment reporting structure to more readily match business operational changes as a result of the January 2008 promotion of Enrique Salem to Chief Operating Officer of Symantec. The following changes have been made to our segment reporting structure: (i) the Security and Data Management Group is now known as the Security and Compliance Group; (ii) the Altiris segment, in its entirety, has been moved into the Security and Compliance Group; (iii) the Data Center Management Group is now known as the Storage and Server Management Group; and (iv) we have moved the Backup Exec products to the Storage and Server Management Group from the Security and Data Management Group. There were no changes to the Consumer, Services, or Other segments. The new business structure more directly aligns the operating segments with markets and customers, and we believe will establish more direct lines of reporting responsibilities, speed decision making, and enhance the ability to pursue strategic growth opportunities. Data shown from the prior periods have been reclassified to match the current reporting structure. |
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| (3) | | Other includes product lines nearing the end of their life cycle. See Item 15, Footnote 15 in our March 2007 10-K. |
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| (4) | | The Americas includes the United States, Latin America, and Canada. |
11
SYMANTEC CORPORATION
Reconciliation of GAAP deferred revenue
to Non-GAAP deferred revenue
(in thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balances as of: | | Jun 30, 2006 | | Sep 30, 2006 | | Dec 31, 2006 | | Mar 31, 2007 | | Jun 30, 2007 | | Sep 30, 2007 | | Dec 31, 2007 | | Mar 31, 2008 |
Deferred revenue reconciliation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| GAAP deferred revenue | | $ | 2,305,334 | | | $ | 2,325,355 | | | $ | 2,559,201 | | | $ | 2,753,783 | | | $ | 2,664,775 | | | $ | 2,598,597 | | | $ | 2,877,173 | | | $ | 3,076,569 | |
| Add back: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deferred revenue related to acquisitions (1) | | | 35,247 | | | | 22,263 | | | | 25,448 | | | | 17,958 | | | | 44,007 | | | | 25,888 | | | | 19,856 | | | | 11,662 | |
| | | |
| Non-GAAP deferred revenue | | $ | 2,340,581 | | | $ | 2,347,618 | | | $ | 2,584,649 | | | $ | 2,771,741 | | | $ | 2,708,782 | | | $ | 2,624,485 | | | $ | 2,897,029 | | | $ | 3,088,231 | |
| | | |
We include certain non-GAAP revenue and deferred revenue components in the tracking and forecasting of our revenue and management of our business. This includes non-GAAP revenue associated with deferred revenue that was excluded as a result of purchase accounting adjustments related to acquisitions. We believe the non-GAAP deferred revenue measures set forth above are useful to investors, and such items are used by our management, because this revenue is reflective of our ongoing operating results.
| | |
| (1) | | We have completed numerous business combinations and acquisitions for a variety of strategic purposes over the past several years. As is the case with our existing business, at the time of acquisition, these acquired businesses had recorded deferred revenue related to past transactions for which revenue would be recognized in future periods as revenue recognition criteria are satisfied. The purchase accounting entries for these acquisitions require us to write down a portion of this deferred revenue to its then current fair value. Consequently, in post acquisition periods, we do not recognize the full amount of this deferred revenue. When measuring the performance of our business, however, we add back certain types of deferred revenue that were excluded as a result of these purchase accounting adjustments, as we believe that this provides information about the operating impact of the acquired businesses in a manner consistent with the revenue recognition for our pre-existing products and services. We believe that the inclusion of this deferred revenue provides useful information to our management as well as to investors. |
12
SYMANTEC CORPORATION
Guidance — Reconciliation of Projected GAAP Revenue, Deferred Revenue and Earnings per Share
to Non-GAAP Revenue, Deferred Revenue and Earnings per Share
(Unaudited)
| | | | | |
| | | Three Months Ended: | |
| | | June 30, 2008 | |
Revenue reconciliation (in millions) | | | | |
| GAAP revenue range | | $ | 1,550 - $1,590 | |
| Add back: | | | | |
Deferred revenue related to acquisitions (1) | | | 5 | |
| | | | |
| Non-GAAP revenue range | | $ | 1,555 - $1,595 | |
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Earnings per share reconciliation | | | | |
| GAAP earnings per share range | | $ | 0.17 - $0.19 | |
| Add back: | | | | |
Stock-based compensation, net of tax(2) | | | 0.04 | |
Deferred revenue related to acquisitions, amortization of acquired product rights and other intangible assets, and restructuring net of tax(1,3,4) | | | 0.13 | |
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| Non-GAAP earnings per share range | | $ | 0.34 - $0.36 | |
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| | | As of : | |
| | | June 30, 2008 | |
Deferred revenue reconciliation (in millions) | | | | |
| GAAP deferred revenue range | | $ | 2,905 - $3,005 | |
| Add back: | | | | |
Deferred revenue related to acquisitions (1) | | | 5 | |
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| Non-GAAP deferred revenue range | | $ | 2,910 - $3,010 | |
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We believe the presentation of these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding the Company’s operating performance by excluding certain items that may not be indicative of the Company’s core business, operating results or future outlook. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing the Company’s operating results both as a consolidated entity and at the business unit level, as well as when planning, forecasting and analyzing future periods. We believe that these non-GAAP financial measures also facilitate comparisons of the Company’s performance to prior periods and to our peers. These measures are used by our management for the reasons associated with each of the adjusting items as described below.
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| (1) | | Fair value adjustment to deferred revenue. We have completed numerous business combinations and acquisitions for a variety of strategic purposes over the past several years. As is the case with our existing business, at the time of acquisition, these acquired businesses recorded deferred revenue related to past transactions for which revenue would be recognized in future periods as revenue recognition criteria are satisfied. The purchase accounting entries for these acquisitions require us to write down a portion of this deferred revenue to its then current fair value. Consequently, in post acquisition periods, we do not recognize the full amount of this deferred revenue. When measuring the performance of our business, however, we add back non-GAAP revenue associated with certain types of deferred revenue that were excluded as a result of these purchase accounting adjustments, as we believe that this provides information about the operating impact of the acquired businesses in a manner consistent with the revenue recognition for our pre-existing products and services. We believe that the inclusion of this revenue and deferred revenue provides useful information to our management as well as to investors. |
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| (2) | | Stock-based compensation.Consists of expenses for employee stock options, restricted stock units, restricted stock awards and our employee stock purchase plan determined in accordance with Statement of Financial Accounting Standards Number 123(R), or SFAS 123(R). When evaluating the performance of our individual business units and developing short and long term plans, we do not consider stock-based compensation charges. Our management team is held accountable for cash-based compensation, but we believe that management is limited in its ability to project the impact of stock-based compensation and accordingly is not held accountable for its impact on our operating results. Although stock-based compensation is necessary to attract and retain quality employees, our consideration of stock based compensation places its primary emphasis on overall shareholder dilution rather than the accounting charges associated with such grants. In addition, for comparability purposes, we believe it is useful to provide a non-GAAP financial measure that excludes stock-based compensation in order to better understand the long-term performance of our core business and to facilitate the comparison of our results to the results of our peer companies. Furthermore, unlike cash compensation, the value of stock-based compensation is determined using a complex formula that incorporates factors, such as market volatility, that are beyond our control. Further, we believe it is useful to investors to understand the impact of SFAS 123(R) to our results of operations. |
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| (3) | | Amortization of acquired product rights and other intangible assets.When conducting internal development of intangible assets, accounting rules require that we expense the costs as incurred. In the case of acquired businesses, however, we are required to allocate a portion of the purchase price to the accounting value assigned to intangible assets acquired and amortize this amount over the estimated useful lives of the acquired intangibles. The acquired company, in most cases, has itself previously expensed the costs incurred to develop the acquired intangible assets, and the purchase price allocated to these assets is not necessarily reflective of the cost we would incur in developing the intangible asset. We eliminate this amortization charge from our non-GAAP operating results to provide better comparability of pre and post-acquisition operating results and comparability to results of businesses utilizing internally developed intangible assets. |
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| (4) | | Restructuring.We have engaged in various restructuring activities over the past several years that have resulted in costs associated with severance, benefits, outplacement services, and excess facilities. Each restructuring has been a discrete event based on a unique set of business objectives or circumstances, and each has differed from the others in terms of its operational implementation, business impact and scope. We do not engage in restructuring activities in the ordinary course of business. While our operations previously benefited from the employees and facilities covered by our various restructuring charges, these employees and facilities have benefited different parts of our business in different ways, and the amount of these charges has varied significantly from period to period. We believe that it is important to understand these charges; however, we do not believe that these charges are indicative of future operating results and that investors benefit from an understanding of our operating results without giving effect to them. |
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