Symantec 1996 Annual Report Download - page 37

Note 3. Cash Equivalents, Short-Term Investments and
Fair Value of Financial Instruments
All cash equivalents and short-term investments have been classi-
fied as available-for-sale securities and are re p o rted at amort i z e d
cost, which approximates fair value, and there f o r e, no material
u n r e a l i zed gains and losses have been included in stockholders’
e q u i t y. As of Ma rc h 3 1 , 1996 and 1995, the estimated fair va l u e
of these securities consisted of the follow i n g :
All of the Company’s available-for-sale securities as of
March 31, 1996 have a contractual maturity of one year or less.
For the year ended Ma rc h 3 1 , 1996, there we r e no material sales
of available-for-sale securities. Fair values of cash, cash equiva-
lents and short-term investments approximate cost due to the
s h o rt period to maturity.
Symantec utilizes some natural hedging to mitigate the
C o m p a n y’s transaction exposures, and effective De c e m b e r 3 1 ,
1993, the Company commenced hedging some residual transac-
tion exposures through the use of one-month foreign exc h a n g e
f o rw a rd contracts. The Company enters into foreign exc h a n g e
f o rw a r d contracts with financial institutions primarily to pro t e c t
against currency exchange risks associated with certain firmly
committed transactions. Fair value of foreign exchange forw a rd
contracts are based on quoted market prices. At Ma r c h 3 1 , 1 9 9 6 ,
t h e r e was a total notional amount of approximately $96.5 mil-
lion of outstanding foreign exchange forw a rd contracts all of
which mature in 35 days or less. The net liability of forw a r d con-
tracts was a notional amount of approximately $85.5 million at
Ma rc h 3 1 , 1996. The fair value of foreign currency exchange for-
w a rd contracts approximates cost due to the short maturity
periods and the minimal fluctuations in foreign curre n c y
e x change rate. The Company does not hedge its translation risk.
Note 4. Convertible Subordinated Debentures
On April 2, 1993, the Company issued conve rtible subord i n a t-
ed debentures totaling $25.0 million. The debentures bear intere s t
at 7.75% payable semiannually and are conve r tible into Sy m a n t e c
common stock at $12 per share at the option of the inve s t o r.
The debentures are due in three equal annual installments
beginning in 1999 and are redeemable at the option of the
i n vestors in the event of a change in control of Symantec or the
sale of all or substantially all of the assets of the Company.
Symantec, at its option, may redeem the notes at any time on 30
to 60 days notice. The holders are entitled to certain re g i s t r a t i o n
rights relating to the shares of common stock resulting from the
c o n version of the debentures. The Company re s e rved 2,083,333
s h a res of common stock to be issued upon conversion of these
d e b e n t u res. The debentures limit the payment of cash dividends
and the re p u r chase of capital stock to a total of $10.0 million
plus 25% of cumulative net income subsequent to April 2,
1 9 9 3 .
On April 26, 1995, conve rtible subordinated debenture s
totaling $10.0 million we re conve rted into 833,333 shares of
Symantec common stock, leaving 1,250,000 shares of common
stock re s e rved for future conversion as of Ma rc h 3 1 , 1 9 9 6 .
The estimated fair value of the $15.0 million conve rtible sub-
o rdinated debentures was approximately $16.1 million at
Ma rc h 3 1 , 1996. The estimated fair value was based on the total
s h a res of common stock re s e rved for issuance upon conve r s i o n
of the debentures at the closing price of the Company’s common
stock at Ma r c h 3 1 , 1996, which exceeded the conversion price
of $12 per share .
Note 5. Line of Credit
The Company has a $10.0 million bank line of credit that
expires in March 1998. The line of credit is available for general
corporate purposes and bears interest at the banks’ re f e r e n c e
(prime) interest rate (8.25% at March 31, 1996), the U.S. off-
s h o re rate plus 1.25%, a C D rate plus 1.25% or LIBOR p l u s
1.25%, at the Company’s discretion. The line of credit requires
bank approval for the payment of cash dividends. Borrowings
under this line are unsecured and are subject to the Company
maintaining certain financial ratios and profits. The Company
was in compliance with the line of credit covenants as of
March 31, 1996. At March 31, 1996, there was approximately
$0.4 million of standby letters of credit outstanding under this
line of credit. There were no borrowings outstanding under this
line at March 31, 1996.
Note 6. Commitments
Symantec leases all of its facilities and certain equipment under
operating leases that expire at various dates through 2026.
The future fiscal year minimum operating lease commitments
we r e as follows at Ma r c h 3 1 , 1 9 9 6 :
Rent expense charged to operations totaled $11.3 million, $9.7
million and $9.8 million for the years ended Ma rc h 3 1 , 1 9 9 6 ,
1995 and 1994, re s p e c t i ve l y.
(In thousands)  
Taxable commercial paper  ,  ,
Money market funds , ,
Taxable corporate notes , —
Taxable certificates of deposit , —
Auction-rate preferred securities —,
 ,  ,
(In thousands)
  ,
 ,
 ,
 ,
 ,
Thereafter ,
 ,