Symantec 1998 Annual Report Download - page 33

53
SYMANTEC CORPORATION
52 SYMANTEC CORPORATION
During fiscal 1997, Symantec recorded a
$1.8 million charge in connection with
the write-off of an equity investment in
a privately held company and a $3.1 mil-
lion charge for the write off of certain
in-process research and development
costs acquired by the Company.
Additionally, during fiscal 1997, the
Company recorded a charge of $3.2 mil-
lion, which included $2.4 million for
personnel severance and outplacement
charges, for costs related to the restruc-
turing of certain domestic and
international sales and research and
development operations, settlement of a
lawsuit and other expenses. The restruc-
turing plans were substantially
completed during fiscal 1997. Symantec
recorded total acquisition charges of $0.6
million in the quarter ended June 30,
1996 in connection with the acquisition
of Fast Track, Inc.
In connection with the acquisition of
Delrina (See Note 3 of Notes to
Consolidated Financial Statements) in
fiscal 1996, Symantec recorded total
acquisition charges of $22.0 million, which
included $8.8 million for legal, accounting
and financial advisory services; $6.4 million
for the elimination of duplicative and excess
facilities and equipment; $3.7 million for
personnel severance and outplacement
expenses; and $3.1 million for the consol-
idation and discontinuance of certain
operational activities and other acquisi-
tion-related expenses.
During fiscal 1996, Symantec sold
the assets of Time Line Solutions
Corporation, a wholly-owned subsidiary,
to a group comprised of Time Line
Solution Corporation’s management and
incurred a $2.7 million loss on the sale.
The Company incurred $2.2 million
for the relocation costs of moving equip-
ment and personnel, during fiscal 1996,
as the result of the consolidation of certain
research and development activities of
the Company’s Third Generation
Language and Fourth Generation
Language development groups.
During fiscal 1996, the Company
recorded $2.0 million for estimated legal
fees expected to be incurred in connection
with a securities class action complaint
filed in March 1996 and other legal
expenses (See Note 15 of Notes to
Note 13. Acquisition, Restructuring and Other Expenses
Acquisition, restructuring and other expenses consist of the following:
Year Ended March 31,
(In thousands) 1998 1997 1996
Centralization and restructuring expenses $ — $ 3,185 $ —
Write off of acquired in-process research
and development costs — 3,050 —
Write off of equity investment — 1,750 —
Fast Track, Inc. acquisition — 600 —
Delrina acquisition — — 22,000
Loss on sale of Time Line Solutions
Corporation assets — — 2,653
Relocation of certain research and
development activities — — 2,229
Central Point acquisition — — (2,300)
Legal fees and expenses — — 2,000
Other — — 1,035
Total acquisition, restructuring and other expenses $ — $ 8,585 $ 27,617
Consolidated Financial Statements).
Symantec also expensed $1.0 million,
which included a loss on the sale of certain
assets and liabilities of a subsidiary and
other expenses, during fiscal 1996.
During fiscal 1996, the Company recog-
nized a reduction in accrued acquisition,
restructuring and other expenses of $2.3
million, as actual costs incurred were less
than costs previously accrued by the
Company in connection with the acqui-
sitions of Central Point Software, Inc.
and SLR Systems, Inc. in fiscal 1995.
As of March 31, 1998, total accrued
cash related acquisition and restructuring
expenses were $2.5 million and included
$0.5 million for the elimination of duplica-
tive and excess facilities and $2.0 million
for other acquisition related expenses.
plaint seeks damages in an unspecified
amount. The complaint has been refiled
twice in state court, most recently on
January 13, 1997, following Symantec’s
motions directed to previous complaints.
On January 7, 1997, the same plaintiffs
filed a complaint in federal court based
on the same facts as the state court com-
plaint, for violation of the Securities
Exchange Act of 1934. The court dismissed
that complaint, and plaintiffs served an
amended complaint in April 1998.
Symantec believes that neither the state
court complaint nor the federal court
complaint has any merit and will vigor-
ously defend itself against both complaints.
On April 23, 1997, Symantec filed a
lawsuit against McAfee Associates, Inc.,
which pursuant to a merger has become
Network Associates, Inc. (“Network
Associates”), in the United States
For the twelve months ended March 31,
1997, 1,250,000 shares of convertible
subordinated debentures and $708,000
of interest expense were excluded from
the computation of diluted net income
per share because the effect would have
been anti-dilutive.
Note 15. Litigation
On March 18, 1996, a class action com-
plaint was filed by the law firm of
Milberg, Weiss, Bershad, Hynes &
Lerach in Superior Court of the State of
California, County of Santa Clara,
against the Company and several of its
current and former officers and direc-
tors. The complaint alleges that
Symantec insiders inflated the stock
price and then sold stock based on inside
information that sales were not going to
meet analysts’ expectations. The com-
Note 14. Net Income (Loss) Per Share
In February 1997, the Financial Accounting Standards Board issued Statement
(“SFAS”) No. 128, “Earnings Per Share,” which was required to be adopted on
December 31, 1997. As a result, the Company has changed the method used to com-
pute earnings per share and has restated all prior periods.
Year Ended March 31,
(In thousands, except per share data) 1998 1997 1996
Basic Net Income (Loss) Per Share
Net income (loss) $ 85,089 $ 26,038 $ (39,783)
Weighted average number of common
shares outstanding during the period 56,097 54,705 52,664
Basic net income (loss) per share $ 1.52 $ 0.48 $ (0.76)
Diluted Net Income (Loss) Per Share
Net income (loss) $ 85,089 $ 26,038 $ (39,783)
Interest on convertible subordinated
debentures, net of income tax effect 692 — —
Net income (loss), as adjusted $ 85,781 $ 26,038 $ (39,783)
Weighted average number of common
shares outstanding during the period 56,097 54,705 52,664
Shares issuable from assumed
exercise of options 2,964 702 —
Shares issuable from assumed conversion
of convertible subordinated debentures 1,220 — —
Total shares for purpose of calculating
diluted net income (loss) per share 60,281 55,407 52,664
Diluted net income (loss) per share $ 1.42 $ 0.47 $ (0.76)
District Court, Northern District of
California, for copyright infringement
and unfair competition. On October 6,
1997, the court found that Symantec had
demonstrated a likelihood of success on
the merits of certain copyright claims,
and issued a preliminary injunction (i)
prohibiting Network Associates from
infringing Symantec’s rights in specified
materials by marketing, selling, transfer-
ring or directly or indirectly copying
into any new Network Associates prod-
uct or new version of an existing product
that has Symantec code, (ii) requiring
Network Associates to notify distributors
who are still selling versions of PC
Medic 97 that have Symantec’s code to
tell customers that they should upgrade
to versions that do not contain Symantec
code, and (iii) requiring Network
Associates to provide Symantec and the
court with a sample of the notice to be
used. On October 17, 1997, Symantec
amended its complaint to include addi-
tional claims for copyright infringement
and misappropriation of trade secrets,
based on additional evidence found in
the discovery process. On April 1, 1998,
Symantec amended its complaint to add
claims for misappropriation of trade
secrets, RICO (Racketeer Influenced and
Corrupt Organizations Act) and related
claims based on additional evidence
uncovered in the litigation. Symantec
continues to investigate the extent to
which Network Associates may have mis-
appropriated Symantec’s intellectual
property, and plans to aggressively pur-
sue its remedies under this lawsuit,
which include both injunctive relief and
monetary damages.
On May 13, 1997, Trend Micro
Incorporated (“Trend”) filed a lawsuit in
the United States District Court,
Northern District of California, against
Symantec Corporation and Network
Associates, alleging patent infringement.