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EXHIBIT 99.1
AXENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
September 30, December 31,
2000 1999
------------- ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 48,041 $ 61,534
Marketable securities 77,067 47,331
Accounts receivable, net 31,616 35,954
Other current assets 4,417 3,696
--------- ---------
Total current assets 161,141 148,515
Property and equipment, net 13,816 12,427
Goodwill and other intangible assets 24,836 29,554
Other assets 8,459 8,384
--------- ---------
Total assets $ 208,252 $ 198,880
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 18,653 $ 23,266
Deferred revenue 19,385 17,935
--------- ---------
Total current liabilities 38,038 41,201
Long term debt, net of current maturities -- 620
--------- ---------
Total liabilities 38,038 41,821
Stockholders' equity:
Preferred stock, $0.02 par value (5,000,000 -- --
shares authorized, none issued)
Common stock, $0.02 par value (50,000,000 580 561
shares authorized, 28,997,316 and
28,047,696 issued and outstanding for
the nine months ended September 30, 2000
and year ended December 31, 1999,
respectively)
Additional paid-in capital 203,384 191,272
Comprehensive income and other (1,432) (623)
Accumulated deficit (32,318) (34,151)
--------- ---------
Total stockholders' equity 170,214 157,059
--------- ---------
Total liabilities and stockholders' equity $ 208,252 $ 198,880
========= =========
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
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AXENT TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
----------------------- -----------------------
2000 1999 2000 1999
-------- -------- -------- --------
Net revenues:
Product licenses $ 21,684 $ 19,129 $ 63,509 $ 51,860
Services 12,401 9,343 34,972 24,485
-------- -------- -------- --------
Total net revenues 34,085 28,472 98,481 76,345
-------- -------- -------- --------
Cost of net revenues 5,774 4,173 15,858 11,037
-------- -------- -------- --------
Gross profit 28,311 24,299 82,623 65,308
Operating expenses:
Sales and marketing 17,361 15,115 49,149 44,430
Research and development 6,872 6,647 20,696 19,863
General and administrative 3,627 2,762 10,488 8,131
Amortization of acquired intangible assets 1,468 1,301 4,420 2,761
Acquisition-related charges 3,753
-------- -------- -------- --------
Total operating expenses 29,328 25,825 84,753 78,938
-------- -------- -------- --------
Loss before interest and taxes (1,017) (1,526) (2,130) (13,630)
Interest income 2,018 1,264 4,739 3,382
Income tax (provision) benefit (370) (329) (776) 1,388
-------- -------- -------- --------
Net income (loss) $ 631 $ (591) $ 1,833 $ (8,860)
======== ======== ======== ========
Net income (loss) per common share (basic) $ 0.02 $ 0.02 $ 0.06 $ (0.32)
Number of shares used in computing net income
(loss) percommon share outstanding (basic) 28,942 27,926 28,735 27,409
Net income (loss) per common share (diluted) $ 0.02 $ 0.02 $ 0.06 $ (0.32)
Number of shares used in computing net income
(loss) per common share outstanding (diluted) 29,959 27,926 29,800 27,409
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
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AXENT TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
For the Nine Months
Ended September 30,
-------------------------
2000 1999
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Cash flow from operating activities:
Net income (loss) $ 1,833 $ (8,860)
Non-cash items:
Depreciation and amortization 8,683 5,967
Deferred income taxes -- (1,571)
Write-off of in process research
and development -- 2,000
Change in assets and liabilities (836) 4,426
--------- ---------
Net cash provided by operating activities 9,680 1,962
Cash flow from investing activities:
Capital expenditures (5,348) (4,676)
Purchases of marketable securities (288,881) (66,822)
Maturity of marketable securities 260,870 43,609
Payments for business acquisitions, net of
cash acquired (516) (3,915)
--------- ---------
Net cash used for investing activities (33,875) (31,804)
Cash flow from financing activities:
Proceeds from issuance of common stock 12,131 2,933
Principal payments on note payable (620) (103)
--------- ---------
Net cash provided by financing activities 11,511 2,830
Effect of exchange rate changes on cash (809) (532)
--------- ---------
Net decrease in cash and cash equivalents (13,493) (27,544)
Cash and cash equivalents, beginning of period 61,534 80,035
--------- ---------
Cash and cash equivalents, end of period $ 48,041 $ 52,491
========= =========
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
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AXENT TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(amounts in thousands)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- ----------------------
2000 1999 2000 1999
------ ------ ------- --------
Net income (loss) 631 (591) 1,833 (8,860)
Currency translation effects (185) (219) (809) (532)
------ ------ ------- --------
Comprehensive income (loss) $ 446 $ (810) $ 1,024 $ (9,392)
====== ====== ======= =========
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
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AXENT TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
Basis of Presentation
AXENT Technologies, Inc. in conjunction with its wholly owned subsidiaries
(collectively, the "Company" or "AXENT") is a global leader in information
security and provides e-security solutions that maximize our customers' business
advantage. AXENT delivers integrated products and expert services to assess,
protect, enable and manage business processes and information assets. Through
our unique Lifecycle Security methodology, combined with Smart Security
Architecture, we deliver the "right" level of security for customers. Our
award-winning solutions offer assessment and policy compliance, firewall,
intrusion detection, authentication, VPN, Web-access, single sign-on and user
administration for the entire enterprise.
The accompanying unaudited condensed consolidated financial statements reflect
all the adjustments, consisting of normal recurring adjustments, that, in the
opinion of management, are necessary for a fair presentation of the results for
the interim periods presented. The results for the three and nine month periods
ended September 30, 2000 may not necessarily be indicative of the results for
the entire year or any future period. The December 31, 1999 condensed
consolidated balance sheet was derived from audited financial statements as of
the same date but does not include all disclosures required by accounting
principles generally accepted in the United States.
These financial statements should be read in conjunction with the Company's
annual audited financial statements and notes thereto for the year ended
December 31, 1999, which are included in the Company's Annual Report on Form
10-K filed with the SEC on April 4, 2000.
Business Combinations
On July 26, 2000, AXENT entered into a definitive merger agreement which would
result in the Company being acquired by Symantec Corporation ("Symantec"), a
provider of broad range content and network security solutions to individuals
and enterprises. The agreement has been approved by the Boards of Directors of
both companies, and provides that this acquisition will be treated as a
stock-for-stock transaction, which was valued at approximately $975 million when
the merger agreement was executed. Under the terms of the agreement, AXENT
shareholders would receive 0.50 shares of Symantec common stock for each share
of AXENT common stock in a tax-free exchange. Symantec would issue approximately
15.3 million shares of common stock to AXENT shareholders to complete the
transaction. The thirty-day waiting period imposed by the Hart-Scott-Rodino
Antitrust Improvements Act regarding the transaction expired on September 3,
2000. In addition, on October 27, 2000, AXENT and Symantec received written
notice from the SEC that the SEC would not review the preliminary joint proxy
statement/prospectus relating to the transaction. Completion of the transaction,
which is expected by the end of calendar year 2000, still requires satisfaction
of certain conditions, including obtaining stockholder approvals of both
companies. The transaction will be accounted for using the purchase method of
accounting whereby AXENT net assets and operating results will be included in
the consolidated financial statements of Symantec from the date of acquisition.
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On March 31, 1999, the Company completed the acquisition of United Kingdom-based
CKS Limited, the parent of PassGo Technologies Limited, a worldwide leader in
centralized user access and control, single sign-on and password synchronization
products. In conjunction with the acquisition, the Company issued 1,486,146
shares of common AXENT common stock to holders of shares and warrants of CKS
Limited and agreed to exchange stock options to purchase 64,157 AXENT shares for
all outstanding CKS Limited stock options. The transaction was accounted for
using the purchase method of accounting and accordingly, the net assets and
operating results of PassGo have been included in the accompanying consolidated
financial statements from the date of acquisition. The purchase price, including
transaction costs of $6.0 million, was approximately $30.96 million. The
allocation of the purchase price was based on the results of an independent
third party valuation and allocated to assets acquired and liabilities assumed,
based on their respective fair values at the acquisition date. The purchase
price allocation resulted in goodwill and other intangibles of approximately
$27.8 million, which is being amortized, on a straight-line basis over their
useful lives, of between three and seven years. During 1999, the Company
recorded a charge for acquired in-process research and development of
approximately $2.0 million related to PassGo. The charge reflects technology
acquired for which technological feasibility had not been reached and for which
there is no alternative future use.
On January 12, 1999, the Company completed its merger with Internet Tools, Inc.
("ITI") in which it acquired 100% of the outstanding stock of ITI for 703,194
shares of AXENT common stock and assumed stock options covering a total of
46,806 shares of AXENT common stock. The Company incurred approximately $1.75
million in acquisition-related transaction and other related costs in connection
with the merger. The business combination was accounted for by the pooling of
interests method of accounting. Accordingly, the assets, liabilities, and
stockholders' equity of ITI were combined with the Company's respective accounts
at recorded values. This acquisition did not meet the criteria for a significant
business combination and, as such, pro forma disclosures are not included
herein.
Net Income Per Common Share
Basic earnings per common share have been computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share have been computed by dividing net income by the weighted
average number of common shares outstanding plus an assumed increase in common
shares outstanding for dilutive securities. Potentially dilutive securities
consist of options and warrants to acquire common stock for a specified price
and their dilutive effect is measured using the treasury method. Potentially
dilutive securities are not included in the diluted earnings per share
calculations for the three and nine months ended September 30, 1999 as their
inclusion would be anti-dilutive to the basic loss per share calculations.
Recent Accounting Pronouncements
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" ("SAB 101"), which is effective for fiscal
years beginning after December 15, 1999. SAB 101 explains how the SEC staff
believes existing rules should be applied or analogized to for transactions not
addressed by existing rules. In accordance with the revised
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requirements, the Company will account for the change in accounting principles
as a cumulative effect adjustment in the fourth quarter of 2000 and believes
that the adjustment will not be material.
On January 1, 1999, the Company adopted the Accounting Standards Executive
Committee of the American Institute of Certified Public Accountants (the
"AICPA") Statement of Position ("SOP") No. 98-5, "Reporting on the Costs of
Start-Up Activities," issued by the Accounting Standards Executive Committee of
the AICPA. SOP No. 98-5 established standards on accounting for start-up and
organization costs and, in general, requires such costs to be expensed as
incurred. The adoption of SOP No. 98-5 did not impact the Company's financial
position or results of operations.
In December 1998, the AICPA issued SOP 98-9, "Modification of SOP 97-2, Software
Revenue Recognition, With Respect to Certain Transactions." SOP 98-9 modifies
SOP 97-2 by requiring revenue to be recognized using the "residual method" if
certain conditions are met. SOP 98-9 is effective for the Company's 2000
financial statements. The Company adopted SOP 98-9 on January 1, 2000.
The Financial Accounting Standards Board (the "FASB") issued Statement of
Financial Accounting Standards ("'SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes a reporting standard for
derivative instruments which will require the Company to record all derivatives
as either assets or liabilities and requires that those instruments are recorded
at their fair value. During June 1999, the FASB issued SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities--Deferral of the Effective
Date of SFAS No. 133." This statement defers the effective date of SFAS 133 to
2001. The Company plans to adopt SFAS No. 133 for the fiscal year beginning
January 1, 2001. The Company believes the adoption of SFAS 133 will not have a
material effect on the consolidated financial statements.
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use". SOP 98-1 became effective
January 1, 1999. The adoption of SOP 98-1 did not impact the Company's financial
position or results of operations.
Information Concerning Business Segments
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 established standards for
reporting information about operating segments in annual financial statements
and requires selected information about operating segments in interim financial
reports issued to stockholders. Operating segments are defined as components of
an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker, or decision making
group, in deciding how to allocate resources and in assessing performance.
The Company's approach to information security is to develop, market and support
security software products that perform a broad range of security functions and
to provide consulting services to address customers' security needs. As such,
the Company has two reportable segments: a software product segment and a
consulting services segment. The software product segment includes products
which provide security assessment and policy management, host and
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network based intrusion detection, systems and network access control, data
confidentiality, user administration, activity monitoring, secure authentication
solutions for remote network access and virtual private networking capabilities
for remote users and remote sites. The consulting services segment includes
training and "Lifecycle Security Services" designed to help organizations
develop a framework and roadmap for assessing potential vulnerabilities;
developing security policies, guidelines, practices and metrics; selecting and
implementing solutions; conducting training; and ensuring appropriate monitoring
and compliance.
The Company evaluates the performance of its operating segments based on income
before royalty, interest, taxes and gains on the sale of marketable securities.
Intersegment sales and transfers are not significant.
Summarized financial information concerning the Company's reportable segments is
shown in the following table. The "Other" segment includes the consulting
services segment as it is below the quantitative thresholds, corporate related
items and, as it relates to segment profit (loss), income and expense not
allocated to reportable segments.
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- -----------------------
2000 1999 2000 1999
-------- -------- --------- ---------
(amounts in thousands)
Net revenues:
Software products $ 31,444 $ 26,334 $ 91,077 $ 71,089
Other 2,641 2,138 7,404 5,256
-------- -------- --------- ---------
Total net revenues $ 34,085 $ 28,472 $ 98,481 $ 76,345
======== ======== ========= =========
Segment operating loss:
Software products 520 (749) 1,798 (8,451)
Other (1,537) (777) (3,928) (5,179)
-------- -------- --------- ---------
Total segment operating loss (1,017) (1,526) (2,130) (13,630)
======== ======== ========= =========
Total assets:
Software products 45,241 43,503
Other 163,011 147,712
--------- ---------
Total assets $ 208,252 $ 191,215
========= =========
The Company's areas of operations are principally in the United States.
Operations outside of the United States are worldwide but primarily in the
United Kingdom, Europe and Asia. Foreign operations' revenue, profit and
identifiable assets are shown in the following table.
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For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- -----------------------
2000 1999 2000 1999
-------- -------- --------- ---------
(amounts in thousands)
Net revenues:
U.S. $ 23,103 $ 18,777 $ 69,509 $ 53,448
International 10,982 9,695 28,972 22,897
-------- -------- --------- ---------
Total net revenues $ 34,085 $ 28,472 $ 98,481 $ 76,345
======== ======== ========= =========
Profit (loss):
U.S. $ (484) $ (1,937) $ 1,246 $ (10,428)
International 1,115 1,346 587 1,568
-------- -------- --------- ---------
Total profit (loss) $ 631 $ (591) $ 1,833 $ (8,860)
======== ======== ========= =========
Total assets:
U.S. $ 184,712 $ 170,420
International 23,540 20,795
--------- ---------
Total assets $ 208,252 $ 191,215
========= =========
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