Symantec 1998 Annual Report Download - page 32

SYMANTEC CORPORATION 51
SYMANTEC CORPORATION
Stock option and warrant activity was as follows: Weighted
Number Average Exercise
(In thousands, except exercise price per share) of Shares Price
Outstanding at March 31, 1995 8,989 $ 14.36
Granted 5,990 16.56
Exercised (1,601) 10.40
Canceled (3,660) 22.14
Outstanding at March 31, 1996 9,718 13.43
Granted 2,681 13.90
Exercised (684) 9.89
Canceled (2,673) 14.21
Outstanding at March 31, 1997 9,042 13.61
Granted 3,857 22.74
Exercised (2,158) 12.73
Canceled (1,413) 15.29
Outstanding at March 31, 1998 9,328 17.32
(In thousands) March 31,
Balances are as follows: 1998 1997
Authorized but unissued 10,785 11,901
Available for future grants 1,457 2,859
Exercisable and vested 3,173 4,066
The following tables summarize information about options outstanding at March 31, 1998:
Outstanding options Exercisable options
Weighted Weighted Weighted
Number of average average Number of average
shares contractual life exercise shares exercise
Range of Exercise Prices (in thousands) (in years) price (in thousands) price
$ 1.00 - $ 13.10 3,246 6.93 $ 11.43 1,579 $ 11.25
$ 13.13 - $ 22.63 3,252 7.87 16.13 1,454 15.83
$ 22.75 - $ 39.13 2,830 9.56 25.44 140 28.03
9,328 8.06 17.32 3,173 14.09
50
Pro Forma Information. The Company
has elected to follow APB Opinion
No. 25, “Accounting for Stock Issued to
Employees,” in accounting for its
employee stock options because, as dis-
cussed below, the alternative fair value
accounting provided for under SFAS No.
123, “Accounting for Stock-Based
Compensation,” requires the use of option
valuation models that were not developed
for use in valuing employee stock options.
Under APB No. 25, because the exercise
price of the Company’s employee stock
options generally equals the market price
of the underlying stock on the date of grant,
no compensation expense is recognized
in the Company’s financial statements.
Pro forma information regarding net
income and earnings per share is required
by SFAS No. 123. This information is
required to be determined as if the
Company had accounted for its employee
stock options (including shares issued
under the Employee Stock Purchase Plan,
collectively called “options”) granted
subsequent to March 31, 1995 under the
fair value method of that statement. The
fair value of options granted in fiscal
years 1997 and 1998 reported below has
been estimated at the date of grant using
a Black-Scholes option pricing model
assuming no expected dividends and the
following weighted average assumptions:
The weighted-average estimated fair
values of employee stock options for fiscal
year 1998 and 1997 were $13.44 and $7.81
per share, respectively. The weighted-average
estimated fair value of employee stock
purchase rights granted under the Employee
Stock Purchase Plan during fiscal year 1998
and 1997 were $14.71 and $7.74, respectively.
For purposes of pro forma disclosures,
the estimated fair values of the options is
amortized to expense over the options’
vesting period (for employee stock options)
and the six-month purchase period (for
stock purchases under the Employee
Stock Purchase Plan). The Company’s
pro forma information is as follows:
The Black-Scholes option valuation model
was developed for use in estimating the
fair value of traded options that have no
vesting restrictions and are fully transfer-
able. In addition, option valuation models
require the input of highly subjective
assumptions, including the expected stock
price volatility. Because the Company’s
options have characteristics significantly
different from those of traded options,
and because changes in the subjective
input assumptions can materially affect
the fair value estimate, in the opinion of
management, the existing models do not
necessarily provide a reliable single measure
of the fair value of its options.
The effects on pro forma disclosures of
applying SFAS No. 123 are not likely to be
representative of the effects on pro forma
disclosures of future years. Because
SFAS 123 is applicable only to options
granted subsequent to March 31, 1995,
its pro forma effect will not be fully
reflected until approximately fiscal 2000.
Note 11. Common Stock Repurchase
On April 29, 1997, the Board of Directors
of Symantec authorized the repurchase of up
to 1,000,000 shares of Symantec common
stock by June 13, 1997. As of June 13, 1997,
management completed the repurchase
of 500,000 shares at prices ranging from
$16.57 to $17.00 per share. Authorization
to repurchase the remaining 500,000
shares has expired as of March 31, 1998.
Additionally, on November 24, 1997,
the Board of Directors of Symantec autho-
rized the repurchase of up to 500,000
shares of Symantec common stock. As of
December 4, 1997 management completed
the repurchase of 500,000 shares at prices
ranging from $25.25 to $26.81 per share.
Note 12. Sale of Product Rights
During September 1996, Symantec sold its
electronic forms software products and
related tangible assets to JetForm for
approximately $100.0 million, payable over
Employee Employee Stock
Stock Options Purchase Plan
Range of Exercise Prices 1998 1997 1996 1998 1997 1996
Expected life (years) 4.84 4.34 4.34 0.50 0.50 0.50
Expected volatility 0.61 0.63 0.74 0.55 0.74 0.60
Risk free interest rate 5.4 % 6.7 % 6.0 % 5.2 % 5.4 % 5.4 %
Year Ended March 31,
(In thousands) 1998 1997 1996
Net income (loss) – Basic – Pro forma $ 68,601 $ 14,123 $ (47,015)
Net income (loss) – Diluted – Pro forma 69,293 14,123 (47,015)
Net income (loss) per share – Basic – Pro forma 1.29 0.28 (0.89)
Net income (loss) per share – Diluted – Pro forma 1.19 0.27 (0.89)
four years in quarterly installments through
the June 2000 quarter. During February
1998, the purchase agreement was amended
to accelerate certain quarterly payments
during the remaining payment term in
exchange for a reduction in the total sale
price to approximately $92.5 million. JetForm
has the option to tender payment in either
cash or in registered JetForm common stock,
within a contractually defined quantity
threshold. Due to the uncertainty regarding
the ultimate collectibility of these install-
ments, Symantec is recognizing the related
revenue as payments are due and collectibil-
ity is assured from JetForm. Symantec
recognized revenue of approximately $24.1
million and $18.3 million from JetForm
during fiscal 1998 and 1997, respectively.
In March 1997, Symantec sold the soft-
ware products and related tangible assets
of its Networking Business Unit to Hewlett-
Packard, resulting in the receipt of
approximately $1.0 million of revenue and
a $2.0 million research and development reim-
bursement in fiscal 1997. Additionally, a
two-year quarterly royalty payment stream,
not to exceed a present value of $27.0
million as of March 1997, commenced
beginning in fiscal 1998, which is solely
contingent on future sales of certain
Hewlett-Packard products. Due to the
uncertainty regarding the amounts upon
which these royalties will be determined,
Symantec is recognizing these amounts as
they are reported by Hewlett-Packard.
Symantec recognized royalty revenue of
approximately $21.5 million from
Hewlett-Packard during fiscal 1998.
In connection with the sale to Hewlett-
Packard, during fiscal 1997, Symantec
wrote off approximately $7.0 million of
unamortized software development costs
and approximately $0.6 million of
unamortized purchased product rights, as
well as incurred approximately $2.0 mil-
lion of legal, accounting and other costs
associated with the transaction.
These options will expire if not exercised by specific dates ranging from April 1998 to
March 2008. Prices for options exercised during the three-year period ended March 31,
1998 ranged from $0.07 to $25.25.