Symantec 1996 Annual Report Download - page 28

Financial Statements). The combined settlement amount of the
cases was $19.0 million, approximately $12.5 million of which
was paid by Sy m a n t e c’s insurance carriers. Symantec re c o r ded a
charge in fiscal 1994 of $6.5 million, re p resenting Sy m a n t e c’s
p o rtion of the settlement.
In fiscal 1994, Central Point purchased from unrelated par-
ties certain in-process software technologies for $3.0 million
which was immediately expensed. (See No t e 10 of Notes to
Consolidated Financial Statements).
Symantec is invo l ved in a number of other judicial and admin-
i s t r a t i ve proceedings incidental to its business (See No t e 11 of
Notes to Consolidated Financial Statements). The Company
intends to defend all of these lawsuits vigorously and, although an
u n f a vorable outcome could occur in one or more of the cases, the
final resolution of these lawsuits, individually or in the aggre g a t e ,
is not expected to have a material adverse effect on the financial
position of the Company. Howe ve r, depending on the amount
and timing of an unfavorable resolution of these lawsuits, it is
possible that the Company’s future results of operations or cash
f l o ws could be materially adversely effected in a particular period.
As of March 31, 1996, total accrued cash related acquisition
and restructuring expenses were $7.8 million and included $2.0
million for legal fees, $3.5 million for the elimination of
duplicative and excess facilities and $2.3 million for the consol-
idation and discontinuance of certain operational activities and
other acquisition-related expenses.
Interest Income, Interest Expense
and Other Income (Expense)
In t e r est income was $7.5 million, $5.6 million and $2.4 million
in fiscal 1996, 1995 and 1994, re s p e c t i ve l y. The increase in inter-
est income in fiscal 1996 over fiscal 1995, and in fiscal 1995 ove r
fiscal 1994 was due to higher average invested cash balances.
In t e r est expense was $1.5 million, $2.4 million and $2.5 million
in fiscal 1996, 1995 and 1994, re s p e c t i ve l y. T he decrease in
i n t e rest expense in fiscal 1996 from fiscal 1995 and 1994 was
principally due to reduced interest expense on conve r tible subor-
dinated debentures that we r e issued on April 2, 1993. On Ap r i l
26, 1995, conve rtible subordinated debentures totaling $10.0
million we re conve rted into 833,333 shares of Symantec common
stock, resulting in the decrease in fiscal 1996 interest e x p e n s e .
Other income (expense) is primarily comprised of fore i g n c u r re n c y
e x change gains and losses from fluctuations in currency exc h a n g e
r a t e s .
The Company conducts business in various foreign curren-
cies and is there f o r e subject to the transaction exposures that
arise from foreign exchange rate movements between the dates
that foreign currency transactions are re c o r ded and the dates
that they are settled. Symantec utilizes some natural hedging to
mitigate the Company’s transaction exposures and, effective
December 31, 1993, the Company commenced hedging some
residual transaction exposures through the use of one-month
f o rw a rd contracts. At Ma rc h 3 1 , 1996, there was a total of
approximately $96.5 million of outstanding forward exchange
contracts. The net liability of forw a r d contracts was approx i m a t e l y
$85.5 million at March 31, 1996. There have been no signifi-
cant gains or losses to date with respect to these activities. Gains
or losses would occur on forw a rd contracts held by the
Company when changes in foreign currency exchange rates
o c c u r. These gains and losses should be largely offset by the
transaction gains and losses resulting from foreign curre n c y
denominated cash, accounts receivable, intercompany balances
and trade payables. There can be no assurance that these strate-
gies will continue to be effective or that transaction gains or
losses can be minimized or forecasted accurately. The Company
does not hedge its translation risk.
Income Taxes
The effective income tax benefit for fiscal 1996 was 10%, which
c o m p a res to an effective income tax provision of 25% in fiscal
1995 and an effective tax benefit of 3% in fiscal 1994. The 1996
income tax benefit of 10% is lower than the statutory rate primari-
ly due to the unbenefitted losses related to the Delrina acquisition.
A net deferred tax asset of approximately $12.8 million is
reflected in the financial statements. Ap p r oximately $35.0 mil-
lion of future U . S . taxable income will be necessary to re a l i ze this
d e f e r r ed tax asset. While there can be no assurance that future
income will be sufficient to re a l i ze this benefit, management is of
the opinion that this benefit will be re a l i zed in the near future
based on projected income from new and existing products. A
valuation allowance of $45.7 million was provided in the finan-
cial statements. Ap p roximately $19.7 million of the va l u a t i o n
a l l owance for deferred tax assets is attributable to stock option
deductions, the benefit of which will be credited to equity when
re a l i zed. Ap p roximately $18.1 million of the valuation allow a n c e
relates to losses and temporary differences associated with
D elrina and the remaining $7.9 million of the va l u a t i o n
a l l owance re p resents net operating loss and tax credit carry f o r-
w a rds of other acquired companies that are limited by separate
return limitations and under the “change of ow n e r s h i p” rules of
Internal Re venue Code Section 382.
Liquidity and Capital Resources
Cash and short-term investments decreased $2.6 million from
$131.8 million at March 31, 1995 to $129.2 million at March
31, 1996. This decrease was largely due to cash expenditures for
capital equipment, which was partially offset by cash provided
f rom operating activities and proceeds from the exe rcise of
stock options. Net cash provided by operating activities was
$11.0 million and was primarily due to the change in net assets
and liabilities and non-cash related expenses, offset in part by
the Company’s net loss of $39.8 million.
Trade accounts receivable decreased $9.0 million from $81.3
million at March 31, 1995 to $72.3 million at March 31, 1996
primarily due to an increase in reserves for product returns at
March 31, 1996.