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USE OF NON-GAAP FINANCIAL INFORMATION: Our results of operations have undergone significant change due to a series of acquisitions, the impact of stock-based compensation, impairment charges and other corporate events. To help our readers understand our past financial performance and our future results, we supplement the financial results that we provide in accordance with generally accepted accounting principles, or GAAP, with non-GAAP financial measures. The method we use to produce non-GAAP results is not computed according to GAAP and may differ from the methods used by other companies. Our non-GAAP results are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Investors are encouraged to review the reconciliation of our non-GAAP financial measures to the comparable GAAP results, which is attached to our quarterly earnings release and which can be found, along with other financial information, on the investor relations' page of our website at www.symantec.com/invest.
SYMANTEC CORPORATION Condensed Consolidated Balance Sheets (In millions, unaudited) March 29, March 30, 2013 2012 (1) ------------- -------------ASSETSCurrent assets: Cash and cash equivalents $ 4,685 $ 3,162 Short-term investments 62 49 Trade accounts receivable, net 1,031 940 Inventories 24 28 Deferred income taxes 198 205 Other current assets 315 249 ------------- ------------- Total current assets 6,315 4,633 ------------- -------------Property and equipment, net 1,122 1,100Intangible assets, net 977 1,337Goodwill 5,841 5,826Other long-term assets 124 124 ------------- ------------- Total assets $ 14,379 $ 13,020 ============= =============LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable $ 334 $ 324 Accrued compensation and benefits 422 416 Deferred revenue 3,496 3,444 Current portion of long-term debt 997 - Other current liabilities 313 321 ------------- ------------- Total current liabilities 5,562 4,505 ------------- -------------Long-term debt 2,094 2,039Long-term deferred revenue 521 529Long-term deferred tax liabilities 403 288Long-term income taxes payable 318 393Other long-term obligations 60 94 ------------- ------------- Total liabilities 8,958 7,848 ------------- ------------- ------------- ------------- Total Symantec Corporation stockholders' equity 5,421 5,094 ------------- -------------Noncontrolling interest in subsidiary - 78 ------------- ------------- Total stockholders' equity 5,421 5,172 ------------- ------------- Total liabilities and stockholders' equity $ 14,379 $ 13,020 ============= =============(1) Derived from audited consolidated financial statements. SYMANTEC CORPORATION Condensed Consolidated Statements of Income (In millions, except per share data, unaudited) Year-Over-Year Three Months Ended Growth Rate -------------------- ---------------------- March 29, March 30, Constant 2013 2012 Actual Currency(1) --------- --------- ---------- -----------Net revenue: Content, subscription, and maintenance $ 1,527 $ 1,470 4% 5% License 221 211 5% 6% --------- --------- ---------- ----------- Total net revenue 1,748 1,681 4% 5% --------- --------- ---------- -----------Cost of revenue: Content, subscription, and maintenance 265 248 License 27 15 Amortization of intangible assets 16 24 --------- --------- ---------- ----------- Total cost of revenue 308 287 7% 7% --------- --------- ---------- -----------Gross profit 1,440 1,394 3% 4% --------- --------- ---------- -----------Operating expenses:Sales and marketing 697 741Research and development 267 241General and administrative 114 113Amortization of intangible assets 71 72Restructuring and transition 40 31Impairment of intangible assets - 4 --------- --------- ---------- ----------- Total operating expenses 1,189 1,202 -1% 0% --------- --------- ---------- -----------Operating income 251 192 31% 31% --------- --------- ---------- ----------- Interest income 3 3 Interest expense (37) (28) Other income (expense), net 12 (2) Gain from sale of joint venture - 526 --------- --------- ---------- -----------Income before income taxes 229 691 -67% N/A --------- --------- ---------- ----------- Provision for income taxes 41 132 --------- --------- ---------- -----------Net income attributable to Symantec Corporation stockholders $ 188 $ 559 -66% N/A ========= ========= ========== ===========Net income per share attributable to Symantec Corporation stockholders -- basic $ 0.27 $ 0.77Net income per share attributable to Symantec Corporation stockholders -- diluted $ 0.26 $ 0.76Weighted-average shares outstanding attributable to Symantec Corporation stockholders -- basic 693 728Weighted-average shares outstanding attributable to Symantec Corporation stockholders -- diluted 714 736(1) Management refers to growth rates adjusting for currency so that the business results can be viewed without the impact of fluctuations in foreign currency exchange rates. We compare the percentage change in the results from one period to another period in order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the actual exchange rates in effect during the respective prior periods. SYMANTEC CORPORATION Condensed Consolidated Statements of Income (In millions, except per share data, unaudited) Year-Over-Year Year Ended Growth Rate -------------------- ---------------------- March 29, March 30, Constant 2013 2012 Actual Currency(1) --------- --------- ---------- -----------Net revenue: Content, subscription, and maintenance $ 6,021 $ 5,823 3% 5% License 885 907 -2% 0% --------- --------- ---------- ----------- Total net revenue 6,906 6,730 3% 5% --------- --------- ---------- -----------Cost of revenue: Content, subscription, and maintenance 1,017 943 License 89 48 Amortization of intangible assets 69 91 --------- --------- ---------- ----------- Total cost of revenue 1,175 1,082 9% 9% --------- --------- ---------- -----------Gross profit 5,731 5,648 1% 4% --------- --------- ---------- -----------Operating expenses: Sales and marketing 2,735 2,814 Research and development 1,012 969 General and administrative 450 437 Amortization of intangible assets 286 289 Restructuring and transition 125 56 Impairment of intangible assets - 4 --------- --------- ---------- ----------- Total operating expenses 4,608 4,569 1% 3% --------- --------- ---------- -----------Operating income 1,123 1,079 4% 8% --------- --------- ---------- ----------- Interest income 12 13 Interest expense (139) (115) Other income (expense), net 27 (6) Loss from joint venture - (27) Gain from sale of joint venture - 526 --------- --------- ---------- -----------Income before income taxes 1,023 1,470 -30% N/A --------- --------- ---------- ----------- Provision for income taxes 258 298 --------- --------- ---------- -----------Net income attributable to Symantec Corporation stockholders $ 765 $ 1,172 -35% N/A ========= ========= ========== ===========Net income per share attributable to Symantec Corporation stockholders -- basic $ 1.09 $ 1.58Net income per share attributable to Symantec Corporation stockholders -- diluted $ 1.08 $ 1.57Weighted-average shares outstanding attributable to Symantec Corporation stockholders -- basic 701 741Weighted-average shares outstanding attributable to Symantec Corporation stockholders -- diluted 711 748(1) Management refers to growth rates adjusting for currency so that the business results can be viewed without the impact of fluctuations in foreign currency exchange rates. We compare the percentage change in the results from one period to another period in order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the actual exchange rates in effect during the respective prior periods. SYMANTEC CORPORATION Condensed Consolidated Statements of Cash Flows (In millions, unaudited) Year Ended ------------------------ March 29, March 30, 2013 2012 (1) ----------- -----------OPERATING ACTIVITIES:Net income $ 765 $ 1,172Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 283 273 Amortization of intangible assets 355 380 Amortization of debt issuance costs and discounts 60 59 Stock-based compensation expense 164 164 Impairment of intangible assets - 4 Deferred income taxes 44 15 Net gain from sale of joint venture - (526) Loss from joint venture - 27 Liquidation of foreign entities - 3 Other 5 (9) Net change in assets and liabilities, excluding effects of acquisitions: Trade accounts receivable, net (107) 89 Inventories 4 2 Accounts payable 33 30 Accrued compensation and benefits 12 (31) Deferred revenue 119 177 Income taxes payable (31) 39 Other assets (68) (14) Other liabilities (45) 47 ----------- ----------- Net cash provided by operating activities 1,593 1,901 ----------- -----------INVESTING ACTIVITIES: Purchases of property and equipment (336) (286) Cash payments for acquisitions, net of cash acquired (28) (508) Purchases of equity investments - (10) Proceeds from sale of joint venture - 530 Purchases of short-term investments - (47) Proceeds from sale of short-term investments 46 3 Other (1) - ----------- ----------- Net cash used in investing activities (319) (318) ----------- -----------FINANCING ACTIVITIES: Net proceeds from sales of common stock under employee stock benefit plans 281 147 Excess income tax benefit from the exercise of stock options 11 8 Tax payments related to restricted stock units (36) (41) Repurchases of common stock (826) (893) Purchase of additional equity interest in subsidiary (111) - Repayments of debt and other obligations - (607) Proceeds from debt issuance, net of discount 996 - Debt issuance costs (7) - ----------- ----------- Net cash provided by (used in) financing activities 308 (1,386) ----------- -----------Effect of exchange rate fluctuations on cash and cash equivalents (59) 15 ----------- -----------Change in cash and cash equivalents 1,523 212Beginning cash and cash equivalents 3,162 2,950 ----------- -----------Ending cash and cash equivalents $ 4,685 $ 3,162 =========== ===========(1) Derived from audited consolidated financial statements. SYMANTEC CORPORATION Reconciliation of Selected GAAP Measures to Non-GAAP Measures (1) (In millions, except per share data, unaudited) Year-Over-Year Non-GAAP Growth Three Months Ended Rate ------------------------------------------- --------------- March 29, 2013 March 30, 2012 Constant ------------------- ----------------------- Non- Non- Currency GAAP Adj GAAP GAAP Adj GAAP Actual (2) ------ ----- ------ ------- ------ ------- ------ --------Net revenue: $1,748 N/A $1,748 $ 1,681 N/A $ 1,681 4% 5% ------ ----- ------ ------- ------ ------- ------ --------Gross profit: $1,440 $ 19 $1,459 $ 1,394 $ 28 $ 1,422 3% 4% Stock-based compensation 3 4 Amortization of intangible assets 16 24 ------ ----- ------ ------- ------ ------- ------ --------Gross margin % -110 82.4% 83.5% 82.9% 84.6% bps -90 bpsOperating expenses: $1,189 $ 147 $1,042 $ 1,202 $ 153 $ 1,049 -1% 1% Stock-based compensation 36 37 Amortization of intangible assets 71 72 Restructuring and transition 40 31 Impairment of intangible assets - 4 Acquisition/ divestiture- related expenses - 1 Settlements of litigation - 8 ------ ----- ------ ------- ------ ------- ------ --------Operating expenses as a % -280 of revenue 68.0% 59.6% 71.5% 62.4% bps -240 bps ------ ----- ------ ------- ------ ------- ------ --------Operating income $ 251 $ 166 $ 417 $ 192 $ 181 $ 373 12% 12% ------ ----- ------ ------- ------ ------- ------ --------Operating margin 170 % 14.4% 23.9% 11.4% 22.2% bps 140 bps ------ ----- ------ ------- ------ ------- ------ -------- .Net income: $ 188 $ 126 $ 314 $ 559 $ (276) $ 283 11% N/A Gross profit adjustment 19 28 Operating expense adjustment 147 153 Non-cash interest expense 15 14 Gain on sale of joint venture - (526) China VAT refund (2) - Income tax effect on above items (46) 61 Tax related adjustments: Release of pre- acquisition tax contingencies (7) (6) ------ ----- ------ ------- ------ ------- ------ --------Diluted net income per share attributable to Symantec Corporation stockholders $ 0.26 $0.18 $ 0.44 $ 0.76 $(0.38) $ 0.38 16% N/A ------ ----- ------ ------- ------ ------- ------ --------Diluted weighted- average shares outstanding attributable to Symantec Corporation stockholders 714 714 736 736 -3% N/A ------ ----- ------ ------- ------ ------- ------ --------(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial measures prepared in accordance with GAAP. For a detailed explanation of these non-GAAP measures, please see Symantec's Explanation of Non-GAAP Measures in Appendix A.(2) Management refers to growth rates adjusting for currency so that the business results can be viewed without the impact of fluctuations in foreign currency exchange rates. We compare the percentage change in the results from one period to another period in order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the actual exchange rates in effect during the respective prior periods. SYMANTEC CORPORATION Revenue and Deferred Revenue Detail (1) (In millions, unaudited) Three Months Ended ------------------------ March 29, March 30, 2013 2012 ----------- -----------GAAP Revenue Content, subscription, and maintenance $ 1,527 $ 1,470 License 221 211 ----------- -----------Total Revenue $ 1,748 $ 1,681 ----------- -----------GAAP Revenue Y/Y Growth Rate Content, subscription, and maintenance 4% 6% License 5% -26% ----------- -----------Total Y/Y Growth Rate 4% 0% ----------- -----------GAAP Revenue Y/Y Growth Rate in Constant Currency Content, subscription, and maintenance 5% 7% License 6% -26% ----------- -----------Total Y/Y Growth Rate in Constant Currency 5% 1% ----------- -----------GAAP Revenue by Segment (2) Consumer $ 530 $ 523 Security and Compliance 513 502 Storage and Server Management 634 591 Services 71 65 ----------- -----------GAAP Revenue by Segment: Y/Y Growth Rate (2) Consumer 1% 2% Security and Compliance 2% 8% Storage and Server Management 7% -6% Services 9% -3% ----------- -----------GAAP Revenue by Segment: Y/Y Growth Rate in Constant Currency (2) Consumer 3% 2% Security and Compliance 4% 9% Storage and Server Management 7% -5% Services 10% -4% ----------- -----------GAAP Revenue by Geography International $ 897 $ 876 US 851 805 Americas (U.S., Latin America, Canada) 957 903 EMEA 483 457 Asia Pacific & Japan 308 321 ----------- -----------GAAP Revenue by Geography: Y/Y Growth Rate International 2% 4% US 6% -3% Americas (U.S., Latin America, Canada) 6% -1% EMEA 6% -5% Asia Pacific & Japan -4% 15% ----------- -----------GAAP Revenue by Geography: Y/Y Growth Rate in Constant Currency International 4% 5% US 6% -3% Americas (U.S., Latin America, Canada) 6% -1% EMEA 5% -1% Asia Pacific & Japan 1% 13% ----------- -----------GAAP Deferred Revenue $ 4,017 $ 3,973 ----------- -----------GAAP Deferred Revenue Y/Y Growth Rate 1% 4% ----------- -----------GAAP Deferred Revenue Y/Y Growth Rate in Constant Currency 3% 5% ----------- -----------(1) Management refers to growth rates adjusting for currency so that the business results can be viewed without the impact of fluctuations in foreign currency exchange rates. We compare the percentage change in the results from one period to another period in order to provide a framework for assessing how our underlying businesses performed. To exclude the effects of foreign currency rate fluctuations, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the actual exchange rates in effect during the respective prior periods (or, in the case of deferred revenue, converted into United States dollars at the actual exchange rate in effect at the end of the prior period).(2) Excluded from this table is our Other segment which is comprised of sunset products nearing the end of their life cycle. The Other segment also includes certain general and administrative expenses; amortization of intangible assets; stock-based compensation expense; restructuring and transition expenses; and certain indirect costs that are not charged to the other operating segments. SYMANTEC CORPORATION Operating Margin by Segment Detail (1) (Unaudited) Three Months Ended ---------------------- March 29, March 30, 2013 2012 ---------- ----------GAAP Operating Margin by Segment Consumer 49% 48% Security and Compliance 28% 23% Storage and Server Management 36% 34% Services 14% 18%(1) Excluded from this table is our Other segment which is comprised of sunset products nearing the end of their life cycle. The Other segment also includes certain general and administrative expenses; amortization of intangible assets; stock-based compensation expense; restructuring and transition expenses; and certain indirect costs that are not charged to the other operating segments.
