Symantec 1999 Annual Report Download - page 38

24
this asset. The net deferred tax asset includes a valuation allowance of approximately $30 million. Approximately $21
million of the valuation allowance for deferred tax assets is attributable to unbenefitted stock option deductions, the
benefit of which we will credit to equity when realized. Approximately $7 million of the valuation allowance for
deferred tax assets is attributable to the charge for acquired in-process research and development expenses, the benefit
of which we do not expect to realize within five years. The remaining $2 million of the valuation allowance represents
net operating loss and tax credit carryforwards of various acquired companies that are limited by separate return
limitations under the “change of ownership” rules of Internal Revenue Code Section 382.
We project our effective tax rate to be 32% in fiscal 2000. This rate is lower than the expected U.S. federal and state
combined statutory rate of 40% due primarily to a lower tax rate from our Irish operations. However, this projection is
subject to change due to fluctuations in and the geographic allocation of earnings. See Item 7: Management’s
Discussion and Analysis of Financial Condition and Results of Operations - Fluctuations in Quarterly Operating Results;
Foreign Operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents, short-term investments and long-term investments decreased approximately $63 million to
$197 million at the end of fiscal 1999 from $260 million at the end of fiscal 1998. This decrease was largely due to the
acquisitions of Quarterdeck, Binary and Intel’s and IBM’s anti-virus businesses and the repurchase of approximately 3
million shares of our stock during the September and December quarters.
Quarterdeck had issued $25 million of 6% convertible senior subordinated notes, or Notes, due in 2001. These
Notes were issued to an institutional investor in a private placement pursuant to the terms of a Note Agreement
dated March 1, 1996. These Notes were paid in full on March 30, 1999.
In addition to cash, short-term investments and long-term investments of $197 million, we have approximately $71
million of restricted investments related to collateral requirements under lease agreements entered into by us during
fiscal 1997 and 1999. In accordance with the lease terms, these funds are not available to meet operating cash
requirements. In addition, we are obligated to comply with certain financial covenants. Future acquisitions may cause
us to be in violation of these financial covenants.
Net cash provided by operating activities was approximately $124 million and was comprised of our net income of
approximately $50 million, plus non-cash related expenses of $57 million and a net increase in assets and liabilities of
$17 million.
Net trade accounts receivable increased $11 million to approximately $76 million and to 39 days sales outstanding at
March 31, 1999 from approximately $65 million and 38 days sales outstanding at March 31, 1998.
On June 9, 1998, the Board of Directors of Symantec authorized the repurchase of up to 5% of our outstanding
common stock before December 31, 1998. The repurchased shares were used for employee stock purchase programs
and option grants. We completed the repurchase as of October 31, 1998, repurchasing approximately 3 million shares
for approximately $56 million at prices ranging from $13.10 to $27.21 per share.
As of March 31, 1999, we were in compliance with all covenants under our bank line of credit agreement. There were
no borrowings under this line and we had less than $1 million of standby letters of credit outstanding under this line.
Future acquisitions may cause us to be in violation of the line of credit covenants. However, we believe that if the line
of credit was canceled or amounts were not available under the line, there would not be a material adverse impact on
the liquidity or capital resources of the Company.
If we were to sustain significant losses, we could be required to reduce operating expenses, which could result in:
• product delays;
• reassessment of acquisition opportunities, which could negatively impact our growth objectives; and/or
• the requirement to pursue further financing options.
We believe that existing cash and short-term investments and cash generated from operating results will be sufficient to
fund operations for the next year.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1997 and March 1998, the Accounting Standards Executive Committee (“AcSEC”) issued Statements of