Symantec 2004 Annual Report Download - page 48

«46»SYMANTEC CORPORATION
2004 Annual Report
We are exposed to market risk related to fluctuations in market
prices, interest rates, and foreign currency exchange rates. We
use certain derivative financial instruments to manage these risks.
All financial instruments used are in accordance with our global
investment policy and global foreign exchange policy. We do not
use derivative financial instruments for trading purposes.
We also hold equity interests in ten privately-held companies. These
investments were recorded at cost, and are classified as other
long-term assets on the Consolidated Balance Sheets. These
investments are inherently risky and we could lose our entire
initial investment in these companies. As of March 31, 2004, these
investments had an aggregate carrying value of $11 million.
INTEREST RATE SENSITIVITY
We consider investments in highly liquid instruments purchased
with an original maturity of 90 days or less to be cash equivalents.
All of our cash equivalents and short-term investments are classified
as available-for-sale securities as of the balance sheet dates. Our
available-for-sale securities are reported at fair market value and
any unrealized gains and losses are included as a component in
Stockholders’ Equity in Accumulated other comprehensive income
(loss) on our Consolidated Balance Sheet. Our cash equivalents
and short-term investments consist primarily of corporate securities,
taxable auction rate securities, US government and government-
sponsored securities and money market funds.
The following table presents the fair value and hypothetical changes in fair market values of our significant financial instruments held as
of March 31, 2004 that are sensitive to changes in interest rates (in millions):
Hypothetical Fair Market Values Given an
Interest Rate Increase (Decrease) of X Basis Points (bps)
Investment Portfolios (in US Dollars) Fair-Value 150 bps 100 bps 50 bps (25 bps) (75 bps)
USD Portfolios $ 988 $ 980 $ 982 $ 985 $ 989 $ 990
EURO Portfolios $1,214 $1,199 $1,204 $1,209 $1,216 $1,219
The modeling technique used above measures the change in fair
market value arising from selected potential changes in interest
rates. Market changes reflect immediate hypothetical parallel
shifts in the yield curve of minus 75 basis points, minus 25 basis
points, plus 50 basis points, plus 100 basis points and plus 150
basis points, which are representative of the movements in the
United States Federal Funds Rate, Euro Area ECB Rate and
Canada Overnight Rate.
EXCHANGE RATE SENSITIVITY
We conduct business in 30 international currencies through
our worldwide operations. We believe that the use of foreign
exchange forward contracts should reduce the risks that arise
from conducting business in international markets.
We hedge risks associated with certain foreign currency cash,
investments, receivables and payables in order to minimize
the impact of changes in foreign currency fluctuations on these
assets and liabilities denominated in foreign currencies.
Foreign exchange forward contracts as of March 31, 2004 were
as follows (in millions):
Resulting Increase (Decrease) in
Future Value of Foreign Forward
Exchange Contracts Given X%
Appreciation (Devaluation) of
Foreign Currency
Foreign Forward Notional
Exchange Contracts Amount 10% 5% (5)% (10)%
Purchased $ 2 $ – $ – $ – $ –
Sold $111 $ (10) $ (5) $ 6 $ 12
We believe that these foreign exchange forward contracts do
not subject us to undue risk from the movement of foreign
exchange rates because gains and losses on these contracts are
offset by losses and gains on the underlying assets and liabili-
ties. All contracts have a maturity of no more than 35 days.
Gains and losses are accounted for as other income (expense),
net each period. We regularly review our hedging program and
may make changes as a result of this review.
NQuantitative and Qualitative Disclosures about Market Risk