Symantec 1998 Annual Report Download - page 29

45
SYMANTEC CORPORATION
44 SYMANTEC CORPORATION
to this date. Symantec is evaluating the
potential impact of these accounting pro-
nouncements on required disclosures.
SFAS 131 is not expected to have a mater-
ial impact on the financial condition or
results of operations of the Company.
In October 1997 and March 1998, the
Accounting Standards Executive
Committee (“AcSEC”) issued Statement
of Position (“SOP”) 97-2, “Software
Revenue Recognition” and SOP 98-4,
“Deferral of the Effective Date of a
Provision of SOP 97-2, Software Revenue
Recognition,” respectively, which provide
guidance on applying generally accepted
accounting principles in recognizing
revenue on software transactions and is
effective for Symantec’s transactions
entered into subsequent to April 3, 1998.
AcSEC is currently deliberating the
potential permanent deferral of certain
provisions of SOP 97-2.
The Company does not believe that
the implementation of SOP 97-2 and
SOP 98-4 will have a material adverse
affect on expected revenues or earnings.
However, in the event subsequent inter-
pretations are contrary to the Company’s
revenue accounting practices, the Company
believes it can change its current business
practices to comply with this guidance
and avoid any material adverse affect on
reported revenues and earnings. There
can be no assurance this will be the case.
Reclassifications
Certain previously reported amounts
have been reclassified to conform to the
current presentation format with no
impact on net income (loss). All financial
information has been restated to conform
to this presentation.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Balance Sheet Information
March 31,
(In thousands) 1998 1997
Cash, cash equivalents and short-term investments:
Cash $ 28,236 $ 33,755
Cash equivalents 110,777 62,003
Short-term investments 86,870 64,324
$ 225,883 $ 160,082
Trade accounts receivable:
Receivables $ 69,574 $ 49,675
Less: allowance for doubtful accounts (4,416) (4,300)
$ 65,158 $ 45,375
Inventories:
Raw materials $ 1,091 $ 1,736
Finished goods 2,084 2,740
$ 3,175 $ 4,476
Equipment and leasehold improvements:
Computer hardware and software $ 107,724 $ 91,533
Office furniture and equipment 29,407 27,706
Leasehold improvements 21,038 17,697
158,169 136,936
Less: accumulated depreciation and amortization (108,139) (85,326)
$ 50,030 $ 51,610
Other assets:
Purchased product rights $ 1,358 $ 591
Capitalized software costs 2,414 2,465
Less: accumulated amortization of
purchased product rights (563) (55)
Less: accumulated amortization
of capitalized software costs (1,739) (964)
Other assets 2,793 2,381
$ 4,263 $ 4,418
Other accrued expenses:
Deferred revenue $ 25,537 $ 11,550
Marketing development funds 12,815 12,529
Other 26,180 27,429
$ 64,532 $ 51,508
Note 2. Income Statement Information Year Ended March 31,
(In thousands) 1998 1997 1996
Technical support costs included
in sales and marketing $ 38,582 $ 35,1 11 $ 34,487
Advertising expense $ 46,814 $ 39,147 $ 43,015
Technical support costs included in sales and marketing relate to the estimated cost
of providing insignificant post-contract support (generally telephone support) that is
accrued at the time of product sale.
Advertising expenditures are charged to operations as incurred except for certain
direct mail campaigns which are deferred and amortized over the expected period of
benefit. Deferred advertising costs have not been material in all periods presented.
Note 3. Business Combinations and Purchased Product Rights
During the three fiscal years ended March 31, 1998, Symantec completed acquisitions
of the following companies:
Shares of Acquired
Symantec Company
Common Stock
Stock Options
Companies Acquired Date Acquired Issued Assumed
Fast Track, Inc. (“Fast Track”) May 28, 1996 600,000 —
Delrina Corporation (“Delrina”) November 22, 1995 13,684,174* 1,271,677
Note 5. Cash Equivalents,
Investments and Fair Value of
Financial Instruments
Available-For-Sale Investments and
Trading Investments
All cash equivalents, short-term invest-
ments, long-term investments and
restricted investments have been classi-
fied as available-for-sale securities.
During fiscal 1998, the Company main-
tained a trading asset portfolio to
generate returns that offset changes in
certain liabilities related to deferred
compensation arrangements. The trading
assets, which consist of marketable
equity securities and have a fair value of
approximately $0.2 million, have been
included in the available-for-sale tabular
disclosure, due to immateriality.
Both acquisitions were accounted for as
poolings of interests. In connection with
the acquisitions of the companies listed
above, Symantec incurred significant
acquisition expenses (See Note 13 of Notes
to Consolidated Financial Statements).
Due to differing year ends of Symantec
and Delrina, financial information for
dissimilar fiscal year ends was combined.
Delrina’s fiscal year ended June 30, 1995
was combined with Symantec’s fiscal
year ended March 31, 1995. Accordingly,
Delrina’s results of operations for the
quarter ended June 30, 1995 were duplicated
in the combined statements of operations
for fiscal 1996 and 1995 and accordingly,
Delrina’s net loss for the quarter ended
June 30, 1995 was credited to stockholder’s
equity. Delrina reported net revenues of
$19.8 million and a net loss of $4.8 million
in the quarter ended June 30, 1995. The
results of operations of Fast Track were
not material to Symantec’s consolidated
financial statements, and therefore,
amounts prior to the date of acquisition
were not restated to reflect the combined
operations of the companies.
Note 4. Capitalized Software
In fiscal 1998, capitalization of certain
software development costs in accordance
with Statement of Financial Accounting
Standards No. 86 did not materially
affect the Company. Amortization
expense for capitalized software develop-
ment costs was approximately $0.8
million in fiscal 1998.
In fiscal 1997, Symantec capitalized
approximately $7.7 million of software
development costs, primarily related to
network administration technology,
which was sold to Hewlett-Packard in
March 1997, resulting in the write off of
approximately $7.0 million of unamor-
tized costs during the fourth quarter of
fiscal 1997 (See Note 12 of Notes to
Consolidated Financial Statements).
Amortization expense for capitalized
software development costs was approxi-
mately $2.9 million in fiscal 1997.
Prior to fiscal 1997, capitalization of
certain software development costs in
accordance with Statement of Financial
Accounting Standards No. 86 did not
materially affect the Company, except for
amounts capitalized by Delrina prior to
its acquisition by Symantec in fiscal 1996.
The related amortization expense was
approximately $5.6 million in fiscal 1996.
*Includes Delrina exchangeable stock that is traded on the Toronto Stock Exchange. Delrina stockholders
received Delrina exchangeable stock in exchange for Delrina common shares at a rate of 0.61 per share.
Delrina exchangeable stock may be converted at any time into Symantec common stock on a one-for-one
basis at each stockholder’s option.