UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One) |
| |
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended July 3, 2015
or |
| |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to
Commission File Number 000-17781
Symantec Corporation
(Exact name of the registrant as specified in its charter)
|
| | |
Delaware | | 77-0181864 |
(State or other jurisdiction of
incorporation or organization) | | (I.R.S. employer
Identification no.) |
| | |
350 Ellis Street, | | |
Mountain View, California | | 94043 |
(Address of principal executive offices) | | (zip code) |
Registrant’s telephone number, including area code:
(650) 527-8000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): |
| | | | | | |
Large accelerated filer þ | | Accelerated filer o | | Non-accelerated filer o | | Smaller reporting company o |
| | (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Shares of Symantec common stock, $0.01 par value per share, outstanding as of July 31, 2015: 684,172,994 shares
SYMANTEC CORPORATION
FORM 10-Q
Quarterly Period Ended July 3, 2015
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SYMANTEC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
|
| | | | | | | |
| July 3, 2015 | | April 3, 2015 * |
| (Unaudited) |
| (In millions, except par value) |
ASSETS |
Current assets: | | | |
Cash and cash equivalents | $ | 2,981 |
| | $ | 2,874 |
|
Short-term investments | 903 |
| | 1,017 |
|
Trade accounts receivable, net | 604 |
| | 993 |
|
Deferred income taxes | 152 |
| | 152 |
|
Deferred commissions | 115 |
| | 131 |
|
Other current assets | 267 |
| | 255 |
|
Total current assets | 5,022 |
| | 5,422 |
|
Property and equipment, net | 1,201 |
| | 1,205 |
|
Intangible assets, net | 596 |
| | 628 |
|
Goodwill | 5,849 |
| | 5,847 |
|
Long-term deferred commissions | 20 |
| | 26 |
|
Other long-term assets | 96 |
| | 105 |
|
Total assets | $ | 12,784 |
| | $ | 13,233 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
Current liabilities: | | | |
Accounts payable | $ | 184 |
| | $ | 213 |
|
Accrued compensation and benefits | 283 |
| | 398 |
|
Deferred revenue | 2,901 |
| | 3,109 |
|
Current portion of long-term debt | 348 |
| | 350 |
|
Other current liabilities | 348 |
| | 383 |
|
Total current liabilities | 4,064 |
| | 4,453 |
|
Long-term debt | 1,741 |
| | 1,746 |
|
Long-term deferred revenue | 518 |
| | 555 |
|
Long-term deferred tax liabilities | 335 |
| | 308 |
|
Long-term income taxes payable | 136 |
| | 134 |
|
Other long-term obligations | 94 |
| | 102 |
|
Total liabilities | 6,888 |
| | 7,298 |
|
Commitments and contingencies |
| |
|
Stockholders’ equity: | | | |
Common stock, $0.01 par value, 3,000 shares authorized; 684 and 898 shares issued; 684 and 684 shares outstanding, respectively | 7 |
| | 7 |
|
Additional paid-in capital | 5,926 |
| | 6,094 |
|
Accumulated other comprehensive income | 116 |
| | 104 |
|
Accumulated deficit | (153 | ) | | (270 | ) |
Total stockholders’ equity | 5,896 |
| | 5,935 |
|
Total liabilities and stockholders’ equity | $ | 12,784 |
| | $ | 13,233 |
|
*Derived from audited financial statements.
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
SYMANTEC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
| | | | | | | |
| Three Months Ended |
| July 3, 2015 | | July 4, 2014 |
| (Unaudited) |
| (In millions, except per share data) |
Net revenue: | | | |
Content, subscription, and maintenance | $ | 1,352 |
| | $ | 1,574 |
|
License | 147 |
| | 161 |
|
Total net revenue | 1,499 |
| | 1,735 |
|
Cost of revenue: | | | |
Content, subscription, and maintenance | 219 |
| | 269 |
|
License | 22 |
| | 27 |
|
Amortization of intangible assets | 13 |
| | 13 |
|
Total cost of revenue | 254 |
| | 309 |
|
Gross profit | 1,245 |
| | 1,426 |
|
Operating expenses: | | | |
Sales and marketing | 521 |
| | 644 |
|
Research and development | 284 |
| | 308 |
|
General and administrative | 96 |
| | 103 |
|
Amortization of intangible assets | 19 |
| | 29 |
|
Restructuring, separation, and transition | 124 |
| | 20 |
|
Total operating expenses | 1,044 |
| | 1,104 |
|
Operating income | 201 |
| | 322 |
|
Interest income | 3 |
| | 3 |
|
Interest expense | (20 | ) | | (21 | ) |
Other (expense) income, net | (11 | ) | | 1 |
|
Income before income taxes | 173 |
| | 305 |
|
Provision for income taxes | 56 |
| | 69 |
|
Net income | $ | 117 |
| | $ | 236 |
|
Net income per share: | | | |
Basic | $ | 0.17 |
| | $ | 0.34 |
|
Diluted | $ | 0.17 |
| | $ | 0.34 |
|
Weighted-average shares outstanding: | | | |
Basic | 682 |
| | 692 |
|
Diluted | 691 |
| | 697 |
|
Cash dividends declared per common share | $ | 0.15 |
| | $ | 0.15 |
|
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
SYMANTEC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
| | | | | | | |
| Three Months Ended |
| July 3, 2015 | | July 4, 2014 |
| (Unaudited) |
| (Dollars in millions) |
Net income | $ | 117 |
| | $ | 236 |
|
Foreign currency translation adjustments, net of tax | 12 |
| | 2 |
|
Comprehensive income | $ | 129 |
| | $ | 238 |
|
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
SYMANTEC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| | | | | | | |
| Three Months Ended |
| July 3, 2015 | | July 4, 2014 |
| (Unaudited) |
| (Dollars in millions) |
OPERATING ACTIVITIES: | | | |
Net income | $ | 117 |
| | $ | 236 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation | 70 |
| | 74 |
|
Amortization of intangible assets | 32 |
| | 42 |
|
Amortization of debt issuance costs and discounts | 1 |
| | 1 |
|
Stock-based compensation expense | 53 |
| | 43 |
|
Deferred income taxes | 31 |
| | 20 |
|
Excess income tax benefit from the exercise of stock options | (5 | ) | | (3 | ) |
Other | 4 |
| | 1 |
|
Net change in assets and liabilities, excluding effects of acquisitions: | | | |
Trade accounts receivable, net | 391 |
| | 308 |
|
Deferred commissions | 22 |
| | — |
|
Accounts payable | (18 | ) | | (57 | ) |
Accrued compensation and benefits | (115 | ) | | (34 | ) |
Deferred revenue | (249 | ) | | (185 | ) |
Income taxes payable | (26 | ) | | (148 | ) |
Other assets | — |
| | 17 |
|
Other liabilities | (8 | ) | | (22 | ) |
Net cash provided by operating activities | 300 |
| | 293 |
|
INVESTING ACTIVITIES: | | | |
Purchases of property and equipment | (78 | ) | | (92 | ) |
Payments for acquisitions, net of cash acquired | — |
| | (19 | ) |
Purchases of short-term investments | (183 | ) | | (712 | ) |
Proceeds from maturities of short-term investments | 222 |
| | 77 |
|
Proceeds from sales of short-term investments | 76 |
| | 22 |
|
Net cash provided by (used in) investing activities | 37 |
| | (724 | ) |
FINANCING ACTIVITIES: | | | |
Repayments of debt and other obligations | (17 | ) | | (18 | ) |
Net proceeds from sales of common stock under employee stock benefit plans | 4 |
| | 23 |
|
Excess income tax benefit from the exercise of stock options | 5 |
| | 3 |
|
Tax payments related to restricted stock units | (33 | ) | | (29 | ) |
Dividends and dividend equivalents paid | (107 | ) | | (104 | ) |
Repurchases of common stock | (90 | ) | | (125 | ) |
Proceeds from other financing, net | — |
| | 34 |
|
Net cash used in financing activities | (238 | ) | | (216 | ) |
Effect of exchange rate fluctuations on cash and cash equivalents | 8 |
| | 7 |
|
Change in cash and cash equivalents | 107 |
| | (640 | ) |
Beginning cash and cash equivalents | 2,874 |
| | 3,707 |
|
Ending cash and cash equivalents | $ | 2,981 |
| | $ | 3,067 |
|
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
SYMANTEC CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Description of Business and Significant Accounting Policies
Business
Symantec Corporation (“Symantec,” “we,” “us,” “our,” and “the Company” refer to Symantec Corporation and all of its subsidiaries) is an information protection expert that helps people, businesses and governments seeking the freedom to unlock the opportunities technology brings – anytime, anywhere.
On August 10, 2015, we entered into a definitive agreement to sell the assets of our information management business to The Carlyle Group and certain co-investors (“Carlyle”). The sale is expected to close by the end of the third quarter of fiscal 2016, subject to regulatory approvals and certain closing conditions, including the operational separation, in all material respects, of the information management business. For additional information about the planned divestiture of our information management business see Note 11.
Basis of presentation
The accompanying unaudited Condensed Consolidated Financial Statements as of July 3, 2015 and April 3, 2015 and for the three months ended July 3, 2015 and July 4, 2014 have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S.") for interim financial information and with the instructions on Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In accordance with those rules and regulations, we have omitted certain information and notes normally provided in our annual Consolidated Financial Statements. In the opinion of management, the unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting only of normal recurring items, except as otherwise noted, necessary for the fair presentation of our financial position, results of operations, and cash flows for the interim periods. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the fiscal year ended April 3, 2015. The results of operations for the three months ended July 3, 2015 are not necessarily indicative of the results expected for the entire fiscal year.
We have a 52/53-week fiscal accounting year. Unless otherwise stated, references to three month ended periods in this report relate to fiscal periods ended July 3, 2015 and July 4, 2014. The three months ended July 3, 2015 consisted of 13 weeks whereas the three months ended July 4, 2014 consisted of 14 weeks. Our 2016 fiscal year consists of 52 weeks and ends on April 1, 2016.
There have been no material changes in our significant accounting policies for the three months ended July 3, 2015, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended April 3, 2015.
Recently adopted accounting guidance
On April 10, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-08, Presentation of Financial Statements and Property, Plant and Equipment, that provides new guidance related to reporting discontinued operations. This standard raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. The standard became effective for the Company in the first quarter of fiscal 2016, and will apply to the treatment of the planned divestiture of our information management business that is expected to close by the end of the third quarter of fiscal 2016. The accounting guidance will impact our financial statements by requiring additional disclosures related to the planned divestiture.
On April 7, 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest-Imputation of Interest, which requires debt issuance costs to be presented as a direct deduction from the carrying amount of the related liability. We adopted the standard in the first quarter of fiscal 2016, and it did not have a material impact upon adoption.
Recent accounting guidance not yet adopted
On May 28, 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, that requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers, and will replace most existing revenue recognition guidance in U.S. GAAP. The standard permits the use of either the retrospective or cumulative effect transition method. On July 9, 2015, the FASB approved a one year deferral in the effective date of the standard. The standard will be effective for the Company on March 31, 2018. We are evaluating the effect that the standard will have on our Condensed Consolidated Financial Statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.
There is no other recently issued authoritative guidance that is expected to have a material impact to our Condensed Consolidated Financial Statements through the reporting date.
Note 2. Fair Value Measurements
For assets and liabilities measured at fair value, such amounts are based on an expected exit price representing the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:
| |
• | Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| |
• | Level 2: Observable inputs that reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| |
• | Level 3: Unobservable inputs reflecting our own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. |
Assets measured and recorded at fair value on a recurring basis
Cash equivalents. Cash equivalents consist primarily of money market funds with original maturities of three months or less at the time of purchase, and the carrying amount is a reasonable estimate of fair value.
Short-term investments. Short-term investments consist of investment securities with original maturities greater than three months and marketable equity securities. Investment securities are priced using inputs such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the fair value of these assets. Marketable equity securities are recorded at fair value using quoted prices in active markets for identical assets.
There have been no transfers between fair value measurement levels during the three months ended July 3, 2015. The following table summarizes our assets measured at fair value on a recurring basis, by level, within the fair value hierarchy:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| July 3, 2015 | | April 3, 2015 |
| Fair Value | | Cash and Cash Equivalents | | Short-term Investments | | Fair Value | | Cash and Cash Equivalents | | Short-term Investments |
| (Dollars in millions) |
Cash | $ | 942 |
| | $ | 942 |
| | $ | — |
| | $ | 807 |
| | $ | 807 |
| | $ | — |
|
Non-negotiable certificates of deposit | 271 |
| | 271 |
| | — |
| | 296 |
| | 260 |
| | 36 |
|
Level 1 | | | | | | | | | | | |
Money market | 1,689 |
| | 1,689 |
| | — |
| | 1,725 |
| | 1,725 |
| | — |
|
U.S. government securities | 252 |
| | — |
| | 252 |
| | 284 |
| | — |
| | 284 |
|
Marketable equity securities | 5 |
| | — |
| | 5 |
| | 5 |
| | — |
| | 5 |
|
| 1,946 |
| | 1,689 |
| | 257 |
| | 2,014 |
| | 1,725 |
| | 289 |
|
Level 2 | | | | | | | | | | | |
Corporate bonds | 148 |
| | — |
| | 148 |
| | 166 |
| | — |
| | 166 |
|
U.S. agency securities | 42 |
| | — |
| | 42 |
| | 68 |
| | — |
| | 68 |
|
Commercial paper | 377 |
| | 79 |
| | 298 |
| | 333 |
| | 82 |
| | 251 |
|
Negotiable certificates of deposit
| 150 |
| | — |
| | 150 |
| | 184 |
| | — |
| | 184 |
|
International government securities | 8 |
| | — |
| | 8 |
| | 23 |
| | — |
| | 23 |
|
| 725 |
| | 79 |
| | 646 |
| | 774 |
| | 82 |
| | 692 |
|
Total | $ | 3,884 |
| | $ | 2,981 |
| | $ | 903 |
| | $ | 3,891 |
| | $ | 2,874 |
| | $ | 1,017 |
|
Fair value of debt
As of July 3, 2015 and April 3, 2015, the fair value of our current and long-term debt was $2.1 billion and $2.2 billion, respectively, based on Level 2 inputs.
Note 3. Goodwill and Intangible Assets
Goodwill
The changes in the carrying amount of goodwill are as follows:
|
| | | | | | | | | | | | | | | |
| Consumer Security | | Enterprise Security | | Information
Management | | Total |
| (Dollars in millions) |
Net balance as of April 3, 2015 | $ | 1,230 |
| | $ | 1,916 |
| | $ | 2,701 |
| | $ | 5,847 |
|
Translation adjustments | — |
| | 1 |
| | 1 |
| | 2 |
|
Net balance as of July 3, 2015 | $ | 1,230 |
| | $ | 1,917 |
| | $ | 2,702 |
| | $ | 5,849 |
|
Intangible assets, net
|
| | | | | | | | | | | | | | | | | | | | | | | |
| July 3, 2015 | | April 3, 2015 |
| Gross
Carrying
Amount | | Accumulated
Amortization | | Net
Carrying
Amount | | Gross
Carrying
Amount | | Accumulated
Amortization | | Net
Carrying
Amount |
| (Dollars in millions) |
Customer relationships | $ | 529 |
| | $ | (351 | ) | | $ | 178 |
| | $ | 730 |
| | $ | (536 | ) | | $ | 194 |
|
Developed technology | 262 |
| | (151 | ) | | 111 |
| | 296 |
| | (172 | ) | | 124 |
|
Finite-lived trade names | 106 |
| | (100 | ) | | 6 |
| | 125 |
| | (117 | ) | | 8 |
|
Patents | 21 |
| | (17 | ) | | 4 |
| | 21 |
| | (16 | ) | | 5 |
|
Total finite-lived intangible assets | 918 |
| | (619 | ) | | 299 |
| | 1,172 |
| | (841 | ) | | 331 |
|
Indefinite-lived trade names | 297 |
| | — |
| | 297 |
| | 297 |
| | — |
| | 297 |
|
Total | $ | 1,215 |
| | $ | (619 | ) | | $ | 596 |
| | $ | 1,469 |
| | $ | (841 | ) | | $ | 628 |
|
As of July 3, 2015, future amortization expense related to intangible assets that have finite lives is as follows by fiscal year:
|
| | | | |
| | July 3, 2015 |
| | (Dollars in millions) |
Remainder of 2016 | | $ | 80 |
|
2017 | | 93 |
|
2018 | | 70 |
|
2019 | | 37 |
|
2020 | | 15 |
|
Thereafter | | 4 |
|
Total | | $ | 299 |
|
Note 4. Restructuring, Separation, and Transition
Our restructuring, separation, and transition costs and liabilities consist primarily of severance, facilities, separation, transition and other related costs. Severance costs generally include severance payments, outplacement services, health insurance coverage, and legal costs. Facilities costs generally include rent expense and lease termination costs, less estimated sublease income. Separation and other related costs include advisory, consulting and other costs incurred in connection with the separation of our information management business. Transition and other related costs consist of consulting charges associated with the implementation of new Enterprise Resource Planning systems. Restructuring, separation, and transition costs are managed at the corporate level and are not allocated to our reportable segments. See Note 6 of these Condensed Consolidated Financial Statements for information regarding the reconciliation of total segment operating income to total consolidated operating income.
Restructuring plans
Fiscal 2014 Plan
We initiated a restructuring plan in the fourth quarter of fiscal 2013 to reduce management and redundant personnel resulting in headcount reductions across the Company. As of July 3, 2015, the related costs for severance and benefits are substantially complete; however, we may experience immaterial adjustments to existing accruals in subsequent periods.
Fiscal 2015 Plan
In fiscal 2015, we announced plans to separate our security and information management businesses into standalone companies. In order to separate the business, we initiated a restructuring plan to properly align personnel and expect to incur associated severance and facilities costs. We also expect to incur separation costs in the form of advisory, consulting and disentanglement expenses. These actions are expected to be substantially completed by the end of the third quarter of fiscal 2016. We expect to incur total severance and facilities costs between $165 million and $195 million. We expect to incur separation costs between $170 million and $190 million, excluding tax implications and potential advisor fees payable upon separation. Total restructuring and separation costs are expected to be between $335 million and $385 million. As of July 3, 2015, liabilities for excess facility obligations at several locations around the world are expected to be paid throughout the respective lease terms as we continue to occupy these facilities, the longest of which extends through fiscal 2019.
Restructuring, separation, and transition summary
|
| | | | | | | | | | | | | | | | | | | |
| April 3, 2015 | | Costs, Net of
Adjustments | | Cash Payments | | July 3, 2015 | | Cumulative
Incurred to Date |
| (Dollars in millions) |
Fiscal 2014 Plan total | $ | 4 |
| | $ | — |
| | $ | (2 | ) | | $ | 2 |
| | $ | 238 |
|
Fiscal 2015 Plan | | | | | | | | | |
Severance costs | 59 |
| | 21 |
| | (36 | ) | | 44 |
| | 123 |
|
Separation costs | 17 |
| | 63 |
| | (40 | ) | | 40 |
| | 144 |
|
Other exit and disposal costs | 6 |
| | 1 |
| | (1 | ) | | 6 |
| | 8 |
|
Fiscal 2015 Plan total | $ | 82 |
| | $ | 85 |
| | $ | (77 | ) | | $ | 90 |
| | $ | 275 |
|
Restructuring and separation plans total | $ | 86 |
| | $ | 85 |
| | $ | (79 | ) | | $ | 92 |
| | |
Transition and other related costs | | | 39 |
| | | | | | |
Total restructuring, separation, and transition costs | | | $ | 124 |
| | | | | | |
As of July 3, 2015, the restructuring and separation liabilities are included in accounts payable, other current liabilities and other long-term obligations in our Condensed Consolidated Balance Sheets.
Note 5. Commitments and Contingencies
Indemnifications
In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, subsidiaries and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of agreements or representations and warranties made by us. In addition, our bylaws contain indemnification obligations to our directors, officers, employees and agents, and we have entered into indemnification agreements with our directors and certain of our officers to give such directors and officers additional contractual assurances regarding the scope of the indemnification set forth in our bylaws and to provide additional procedural protections. We maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and officers. It is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements might not be subject to maximum loss clauses. Historically, we have not incurred material costs as a result of obligations under these agreements and we have not accrued any liabilities related to such indemnification obligations in our Condensed Consolidated Financial Statements.
We provide limited product warranties and the majority of our software license agreements contain provisions that indemnify licensees of our software from damages and costs resulting from claims alleging that our software infringes on the intellectual property rights of a third party. Historically, payments made under these provisions have been immaterial. We monitor the conditions that are subject to indemnification to identify if a loss has occurred.
Litigation contingencies
GSA
During the first quarter of fiscal 2013, we were advised by the Commercial Litigation Branch of the Department of Justice’s Civil Division and the Civil Division of the U.S. Attorney’s Office for the District of Columbia that the government is investigating our compliance with certain provisions of our U.S. General Services Administration (“GSA”) Multiple Award Schedule Contract No. GS-35F-0240T effective January 24, 2007, including provisions relating to pricing, country of origin, accessibility, and the disclosure of commercial sales practices.
As reported on the GSA’s publicly-available database, our total sales under the GSA Schedule contract were approximately $222 million from the period beginning January 2007 and ending September 2012. We have fully cooperated with the government throughout its investigation and in January 2014, representatives of the government indicated that their initial analysis of our actual damages exposure from direct government sales under the GSA schedule is approximately $145 million; since the initial meeting, the government’s analysis of our potential damages exposure relating to direct sales has increased. The government has also indicated they are going to pursue claims for certain sales to New York, California, and Florida as well as sales to the federal government through reseller GSA Schedule contracts, which could significantly increase our potential damages exposure.
In 2012, a sealed civil lawsuit was filed against Symantec related to compliance with the GSA Schedule contract and contracts with California, Florida, and New York. On July 18, 2014, the Court-imposed seal expired, and the government intervened in the lawsuit. On September 16, 2014, the states of California and Florida intervened in the lawsuit, and the state of New York notified the Court that it would not intervene. On October 3, 2014, the Department of Justice filed an amended complaint, which did not state a specific damages amount. On October 17, 2014, California and Florida combined their claims with those of the Department of Justice and the relator on behalf of New York in an Omnibus Complaint; the state claims also do not state specific damages amounts.
It is possible that the litigation could lead to claims or findings of violations of the False Claims Act, and could be material to our results of operations and cash flows for any period. Resolution of False Claims Act investigations can ultimately result in the payment of somewhere between one and three times the actual damages proven by the government, plus civil penalties in some cases, depending upon a number of factors. Our current estimate of the low end of the range of the probable estimated loss from this matter is $25 million, which we have accrued. This amount contemplates estimated losses from both the investigation of compliance with the terms of the GSA Schedule contract as well as possible violations of the False Claims Act. There is at least a reasonable possibility that a loss may have been incurred in excess of our accrual for this matter, however, we are currently unable to determine the high end of the range of estimated losses resulting from this matter.
IV
On December 8, 2010, Intellectual Ventures ("IV") sued Symantec for patent infringement in the U.S. District Court in Delaware. The complaint alleged infringement by various Symantec internet security products. On February 6, 2015, the jury issued a verdict and subsequent Court decisions invalidated some of the patents-in-suit, therefore leaving an $8 million damages verdict. Symantec is considering its options to seek to overturn all or part of that verdict. Symantec does not believe that it is probable that it has incurred a material loss and, as a result, has not made an accrual for this matter.
EDS & NDI
On January 24, 2011, a class action lawsuit was filed against the Company and its previous e-commerce vendor Digital River, Inc. Against the Company, the lawsuit alleged violations of California’s Unfair Competition Law, the California Legal Remedies Act and unjust enrichment related to prior sales of Extended Download Service ("EDS") and Norton Download Insurance ("NDI"). On March 31, 2014, the U.S. District Court for the District of Minnesota certified a class of all people who purchased these products between January 24, 2005, and March 10, 2011. In April 2015, we reached agreement in principle with the plaintiffs under which the Company will pay the plaintiffs $30 million, which we have accrued.
Other
We are involved in a number of other judicial and administrative proceedings that are incidental to our business. Although adverse decisions (or settlements) may occur in one or more of the cases, it is not possible to estimate the possible loss or losses from each of these cases. The final resolution of these lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on our business, results of operations, financial condition or cash flows.
Note 6. Segment Information
The three reporting segments, which are the same as our operating segments, are as follows:
| |
• | Consumer Security: Our Consumer Security segment focuses on making it simple for customers to be productive and protected at home and at work. Our Norton-branded services provide multi-layer security and identity protection on major desktop and mobile operating systems, to defend against increasingly complex online threats to individuals, families, and small businesses. |
| |
• | Enterprise Security: Our Enterprise Security segment protects organizations so they can securely conduct business while leveraging new platforms and data. Our Enterprise Security segment includes our threat protection products, information protection products, trust services, and cyber security services. |
| |
• | Information Management: Our Information Management segment focuses on backup and recovery, archiving and eDiscovery, storage and high availability solutions, helping to ensure that our customers’ IT infrastructure and |
mission-critical applications are protected, managed and available. For additional information about the planned divestiture of our information management business see Note 11.
There were no intersegment sales for the periods presented. The following table summarizes the operating results of our reporting segments:
|
| | | | | | | | | | | | | | | |
| Consumer Security | | Enterprise Security | | Information
Management | | Total Segments |
| (Dollars in millions) |
Three Months Ended July 3, 2015 | | | | | | | |
Net revenue | $ | 430 |
| | $ | 482 |
| | $ | 587 |
| | $ | 1,499 |
|
Operating income | 245 |
| | 30 |
| | 135 |
| | 410 |
|
Three Months Ended July 4, 2014 | | | | | | | |
Net revenue | $ | 533 |
| | $ | 552 |
| | $ | 650 |
| | $ | 1,735 |
|
Operating income | 268 |
| | 70 |
| | 89 |
| | 427 |
|
Operating segments are based upon the nature of the business and how the business is managed. Our Chief Operating Decision Maker, which is comprised of our Chief Executive Officer and Chief Financial Officer, uses this financial information to evaluate the performance of, and to assign resources to, each of the operating segments. We do not allocate to the operating segments certain operating expenses which we manage separately at the corporate level. These unallocated costs consist of stock-based compensation expense, amortization of intangible assets and restructuring, separation, and transition charges.
The following table provides a reconciliation of the total of the reportable segments’ operating income to the consolidated operating income:
|
| | | | | | | |
| Three Months Ended |
| July 3, 2015 | | July 4, 2014 |
| (Dollars in millions) |
Total segment operating income | $ | 410 |
| | $ | 427 |
|
Less reconciling items: | | | |
Stock-based compensation | 53 |
| | 43 |
|
Amortization of intangibles | 32 |
| | 42 |
|
Restructuring, separation, and transition | 124 |
| | 20 |
|
Total consolidated operating income | $ | 201 |
| | $ | 322 |
|
Note 7. Stockholders' Equity
Dividends
The following table summarizes dividends declared and paid for the periods presented:
|
| | | | | | | |
| Three Months Ended |
| July 3, 2015 | | July 4, 2014 |
| (Dollars in millions, except per share data) |
Dividends declared and paid | $ | 103 |
| | $ | 104 |
|
Cash dividends declared per common share | $ | 0.15 |
| | $ | 0.15 |
|
Each quarterly dividend was recorded as a reduction to additional paid-in capital. Our restricted stock and performance-based stock units have dividend equivalent rights entitling holders to dividend equivalents to be paid in the form of cash upon vesting for each share of the underlying units.
On August 11, 2015, we declared a cash dividend of $0.15 per share of common stock to be paid on September 16, 2015 to all stockholders of record as of the close of business on August 26, 2015. All shares of common stock issued and outstanding, and unvested restricted stock and performance-based stock, as of the record date will be entitled to the dividend and dividend equivalents, respectively. Any future dividends and dividend equivalents will be subject to the approval of our Board of Directors.
Stock repurchases
Through our stock repurchase programs we have repurchased shares on a quarterly basis since the fourth quarter of fiscal 2004. The following table summarizes our stock repurchases for the period presented.
|
| | | |
| Three Months Ended |
| July 3, 2015 |
| (In millions, except per share data) |
Total number of shares repurchased | 4 |
|
Dollar amount of shares repurchased | $ | 90 |
|
Average price paid per share | $ | 24.39 |
|
Remaining authorization at end of period | $ | 1,068 |
|
Changes in accumulated other comprehensive income by component
Components of accumulated other comprehensive income, on a net of tax basis, were as follows:
|
| | | | | | | | | | | |
| Foreign Currency Translation Adjustments | | Unrealized Gain On Available-For-Sale Securities | | Total |
| (Dollars in millions) |
Balance as of April 3, 2015 | $ | 101 |
| | $ | 3 |
| | $ | 104 |
|
Other comprehensive income before reclassifications | 12 |
| | — |
| | 12 |
|
Amounts reclassified from accumulated other comprehensive income | — |
| | — |
| | — |
|
Balance as of July 3, 2015 | $ | 113 |
| | $ | 3 |
| | $ | 116 |
|
Note 8. Stock-Based Compensation
Stock-based compensation expense
The following table sets forth the total stock-based compensation expense recognized in our Condensed Consolidated Statements of Income.
|
| | | | | | | |
| Three Months Ended |
| July 3, 2015 | | July 4, 2014 |
| (Dollars in millions) |
Cost of revenue | $ | 5 |
| | $ | 6 |
|
Sales and marketing | 19 |
| | 17 |
|
Research and development | 19 |
| | 13 |
|
General and administrative | 10 |
| | 7 |
|
Total stock-based compensation expense | 53 |
| | 43 |
|
Tax benefit associated with stock-based compensation expense | (15 | ) | | (12 | ) |
Net stock-based compensation expense | $ | 38 |
| | $ | 31 |
|
Restricted stock units
The following table summarizes additional information related to our stock-based compensation from restricted stock units, which are our primary equity awards:
|
| | | | | | | |
| Three Months Ended |
| July 3, 2015 | | July 4, 2014 |
| (Dollars in millions, except per grant data) |
Restricted stock units | | | |
Weighted-average fair value per grant | $ | 23.92 |
| | $ | 21.22 |
|
Fair value of awards granted | $ | 256 |
| | $ | 236 |
|
Total fair value of awards vested | $ | 116 |
| | $ | 71 |
|
Total unrecognized compensation expense | $ | 501 |
| | $ | 389 |
|
Weighted-average remaining vesting period | 2.5 years |
| | 3.1 years |
|
Note 9. Income Taxes
Our effective tax rate was approximately 32% and 23% for the three months ended July 3, 2015 and July 4, 2014, respectively. Our effective tax rate differs from the federal statutory income tax rate primarily due to the benefits of lower-taxed international earnings and domestic manufacturing incentives, partially offset by state income taxes. The higher effective tax rate for the three months ended July 3, 2015 as compared to the three months ended July 4, 2014 is due primarily to a different geographic mix of earnings and the treatment of certain transaction costs in determining the effective tax rate. The tax benefit associated with certain of these transaction costs will change as a result of the sale of the information management business. For additional information about the planned divestiture of our information management business see Note 11.
For the three months ended July 3, 2015 and July 4, 2014, the effective tax rate was reduced by tax benefits primarily resulting from settlements with certain taxing authorities and lapses of statutes of limitations of $3 million and $14 million, respectively. For the three months ended July 3, 2015, these tax benefits were offset as a result of certain transaction costs not fully deductible for tax purposes.
We are a U.S.-based multinational company subject to tax in multiple U.S. and international tax jurisdictions. A substantial portion of our international earnings were generated from subsidiaries organized in Ireland and Singapore. Our results of operations would be adversely affected to the extent that our geographical mix of income becomes more weighted toward jurisdictions with higher tax rates and would be favorably affected to the extent the relative geographic mix shifts to lower tax jurisdictions. Any change in our mix of earnings is dependent upon many factors and is therefore difficult to predict.
The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. Although potential resolution of uncertain tax positions involve multiple tax periods and jurisdictions, it is reasonably possible that the gross unrecognized tax benefits related to these audits could decrease (whether by payment, release, or a combination of both) in the next 12 months by $33 million, which could reduce our income tax provision and therefore benefit the resulting effective tax rate.
On July 27, 2015, the U.S. Tax Court invalidated a U.S. Treasury regulation requiring the inclusion of stock-based compensation in certain intercompany cost-sharing agreements. We are currently evaluating the impact of this decision on our current and historic tax filing positions. We continue to monitor the progress of ongoing income tax controversies and the impact, if any, of the expected tolling of the statute of limitations in various taxing jurisdictions.
Note 10. Earnings Per Share
The components of earnings per share are as follows:
|
| | | | | | | |
| Three Months Ended |
| July 3, 2015 | | July 4, 2014 |
| (In millions, except per share data) |
Net income | $ | 117 |
| | $ | 236 |
|
Net income per share — basic | $ | 0.17 |
| | $ | 0.34 |
|
Net income per share — diluted | $ | 0.17 |
| | $ | 0.34 |
|
Weighted-average shares outstanding — basic | 682 |
| | 692 |
|
Dilutive potential shares from stock-based compensation | 9 |
| | 5 |
|
Weighted-average shares outstanding — diluted | 691 |
| | 697 |
|
Anti-dilutive effect of stock-based compensation | — |
| | 2 |
|
Note 11. Subsequent Events
Planned divestiture of our information management business
On August 10, 2015, we entered into a definitive agreement to sell the assets of our information management business to Carlyle for cash consideration of approximately $8.0 billion and the assumption of certain liabilities. The divestiture of our information management business will help us accelerate our unified security strategy, provide a stronger financial foundation for strategic investments, and return additional cash to our shareholders through a combination of share repurchases and dividends. The sale is expected to close by the end of the third quarter of fiscal 2016, subject to regulatory approvals and certain closing conditions, including the operational separation, in all material respects, of the information management business.
We are in the process of evaluating the transaction and its impact on our consolidated financial statements, including evaluating the resulting net gain and income tax expense that will be recognized, based on all the terms of the agreement. The Company's U.S. and foreign income taxes payable resulting from the transaction are estimated to range from $1.3 billion to $1.7 billion.
We expect that effective at the beginning of our third quarter of fiscal 2016, the financial results of our information management business will be presented as discontinued operations on the Condensed Consolidated Statements of Income when we meet the criteria for the information management business to be classified as held for sale. Subsequently, we will have two remaining reporting segments, Consumer Security and Enterprise Security.
Stock repurchase program
On August 9, 2015, our Board of Directors authorized a new $1.5 billion stock repurchase program which commenced immediately and does not have an expiration date. This is in addition to the previous program with $1.1 billion remaining authorized for future repurchase.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements and Factors That May Affect Future Results
The discussion below contains forward-looking statements, which are subject to safe harbors under the Securities Act of 1933, as amended (the “Securities Act”) and the Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include references to our ability to utilize our deferred tax assets, as well as statements including words such as “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” and similar expressions. In addition, statements that refer to our plans to sell the assets of our information management business to Carlyle, timing of reporting discontinued operations, projections of our future financial performance, anticipated growth and trends in our businesses and in our industries, the anticipated impacts of acquisitions, our intent to pay quarterly cash dividends in the future, the actions we intend to take as part of our new strategy, the expected impact of our new strategy and other characterizations of future events or circumstances are forward-looking statements. These statements are only predictions, based on our current expectations about future events and may not prove to be accurate. We do not undertake any obligation to update these forward-looking statements to reflect events occurring or circumstances arising after the date of this report. These forward-looking statements involve risks and uncertainties, and our actual results, performance, or achievements could differ materially from those expressed or implied by the forward-looking statements on the basis of several factors, including those that we discuss in Risk Factors, set forth in Part I, Item 1A, of our annual report on Form 10-K for the fiscal year ended April 3, 2015. We encourage you to read that section carefully.
OVERVIEW
Our business
Symantec Corporation is a global leader in security, backup and availability solutions. Our market leading products and services protect people and information in any environment – from the mobile device in your pocket, to the enterprise data center, to cloud-based systems. Founded in April 1982, Symantec operates one of the largest global threat-intelligence networks. The company has more than 19,000 employees in approximately 50 countries.
On August 10, 2015, we entered into a definitive agreement to sell the assets of our information management business to Carlyle. The sale is expected to close by the end of the third quarter of fiscal 2016, subject to regulatory approvals and certain closing conditions, including the operational separation, in all material respects, of the information management business. For additional information about the planned divestiture of our information management business see "Planned divestiture of our information management business" below and Note 11 of the Notes to Condensed Consolidated Financial Statements in this quarterly report on Form 10-Q.
Fiscal calendar
We have a 52/53-week fiscal year ending on the Friday closest to March 31. The three months ended July 3, 2015 and July 4, 2014 consisted of 13 and 14 weeks, respectively.
Strategy
In our security business, we operate a global civilian cyber intelligence threat network and track a vast number of threats across the Internet from hundreds of millions of mobile devices, endpoints, and servers across the globe. We believe one of our competitive advantages is our database of threat indicators which allows us to reduce the number of false positives and provide faster and better protection for customers through our products. We are leveraging our capabilities in threat protection and data loss prevention and extending them into our core security offerings. We are also pioneering new solutions in growing markets like cloud, advanced threat protection, information protection and cyber security services.
Our security strategy is to deliver a unified security analytics platform that provides big data analytics, utilizes our vast telemetry, provides visibility into real-time global threats, and powers Symantec and third-party security analytics applications; leverage this analytics platform to provide best-in-class consumer and enterprise security products; and offer cyber security services that provide a full-suite of services from monitoring to incident response to threat intelligence, all supported by over 500 cyber security experts and nine global security response centers.
In our information management business, with a global installed customer base, we have a comprehensive portfolio that spans backup and recovery, storage management and archiving. Our information availability offerings help customers keep their data and systems available where they need them, when they need them, and irrespective of their location. Our information insight solutions help customers know what data they have and leverage that knowledge to help manage such data better and inform strategic decisions.
Our information management product strategy is to expand our best-in-class foundational portfolio across backup, storage management, business continuity, archiving and eDiscovery through software, integrated appliances and the cloud; deliver next-generation availability solutions through a coordinated orchestration architecture focused on managing and moving
mission-critical data in a hybrid cloud world; and enable next-generation insight solutions that provide visibility, action, and automated control across an organization’s information landscape through an intelligent information fabric that integrates our portfolio and third-party ecosystems.
In fiscal 2016, we remain focused on our five priorities: running our businesses with a portfolio approach by managing certain businesses for operating margin; prioritizing investments for growth; further reducing costs and improving efficiencies; attracting top talent to our executive team; and continuing to return significant cash to shareholders. We are optimizing some of our businesses by methodically evaluating every product line to balance our profitability targets against our objectives. In order to prioritize investments for growth, we are realigning our research and development budgets to apply the best resources to the most promising market opportunities. To further reduce costs and improve efficiencies, we are consolidating our global footprint, data centers and product support capabilities as well as streamlining the way we run our businesses with initiatives to increase research and development efficiencies and sales productivity. We are focused on continuing to attract talented business and technology leaders to the company. We remain committed to returning significant cash to shareholders in the form of dividends and share buybacks.
Planned divestiture of our information management business
On August 10, 2015, we entered into a definitive agreement to sell the assets of our information management business to Carlyle for cash consideration of approximately $8.0 billion and the assumption of certain liabilities. The divestiture of our information management business will help us accelerate our unified security strategy, provide a stronger financial foundation for strategic investments, and return additional cash to our shareholders through a combination of share repurchases and dividends. The sale is expected to close by the end of the third quarter of fiscal 2016, subject to regulatory approvals and certain closing conditions, including the operational separation, in all material respects, of the information management business.
We expect that effective at the beginning of our third quarter of fiscal 2016, the financial results of our information management business will be presented as discontinued operations on the Condensed Consolidated Statements of Income when we meet the criteria for the information management business to be classified as held for sale. Subsequently, we will have two remaining reporting segments, Consumer Security and Enterprise Security.
For additional information about the planned divestiture, see Note 11 of the Notes to Condensed Consolidated Financial Statements in this quarterly report.
Our operating segments
Our current operating segments are significant strategic business units that offer different products and services distinguished by customer needs. The three reporting segments, which are the same as our operating segments, are:
| |
• | Consumer Security: Our Consumer Security segment focuses on making it simple for customers to be productive and protected at home and at work. Our Norton-branded services provide multi-layer security and identity protection on major desktop and mobile operating systems, to defend against increasingly complex online threats to individuals, families, and small businesses. |
| |
• | Enterprise Security: Our Enterprise Security segment protects organizations so they can securely conduct business while leveraging new platforms and data. Our Enterprise Security segment includes our threat protection products, information protection products, trust services, and cyber security services. |
| |
• | Information Management: Our Information Management segment focuses on backup and recovery, archiving and eDiscovery, storage and high availability solutions, helping to ensure that our customers’ IT infrastructure and mission-critical applications are protected, managed and available. For additional information about the planned divestiture of our information management business see Note 11 of the Notes to Condensed Consolidated Financial Statements in this quarterly report. |
For further description of our operating segments see Note 6 of the Notes to Condensed Consolidated Financial Statements in this quarterly report.
Financial results and trends
The following table provides an overview of key financial metrics for the periods indicated below:
|
| | | | | | | |
| Three Months Ended |
| July 3, 2015 | | July 4, 2014 |
| (Dollars in millions) |
Consolidated Income Statement Data: | | | |
Total net revenue | $ | 1,499 |
| | $ | 1,735 |
|
Gross profit | 1,245 |
| | 1,426 |
|
Operating income | 201 |
| | 322 |
|
Operating margin percentage | 13 | % | | 19 | % |
Consolidated Cash Flow and Balance Sheet Data: | | | |
Cash flow from operations | $ | 300 |
| | $ | 293 |
|
Deferred revenue | 3,419 |
| | 3,713 |
|
The three months ended July 4, 2014 consisted of 14 weeks, whereas the three months ended July 3, 2015 consisted of 13 weeks. The 14th week contributed incremental revenue, cost of revenue and operating expenses to the quarter ended July 4, 2014 when compared to the quarter ended July 3, 2015.
Total net revenue decreased $236 million primarily due to the general strengthening of the U.S. dollar against foreign currencies, the additional week in the quarter ended July 4, 2014, and declines in our consumer security products driven by our channel strategy to exit certain high-cost original equipment manufacturer ("OEM") arrangements and changes to our renewal practices.
Gross margin was 83% for the three months ended July 3, 2015 compared to 82% for the three months ended July 4, 2014 primarily driven by lower fees under revenue-sharing agreements associated with our exit of certain high-cost OEM arrangements.
Operating income decreased $121 million due to lower net revenue, partially offset by lower operating expenses. Our operating expenses decreased due to incremental operating expenses in the additional week of the quarter ended July 4, 2014, our cost savings initiatives and favorable foreign currency effects of approximately $40 million. This was partially offset by a $104 million increase in restructuring, separation, and transition costs in connection with our fiscal 2015 restructuring and separation plan initiated in connection with our plans to separate our business into two standalone companies. We expect our operating margins to fluctuate in future periods as a result of a number of factors, including our operating results and the timing and amount of expenses incurred.
Net cash provided by operating activities was $300 million for the three months ended July 3, 2015, which resulted from net income of $117 million adjusted for non-cash items, including depreciation and amortization charges of $103 million and stock-based compensation expense of $53 million, as well as net changes in trade receivables resulting in inflows of $391 million. These amounts were partially offset by decreases in deferred revenue of $249 million and accrued compensation and benefits of $115 million.
Total deferred revenue decreased $294 million from $3,713 million at July 4, 2014 to $3,419 million at July 3, 2015 primarily due to unfavorable foreign currency fluctuations.
Critical accounting policies and estimates
There have been no material changes in the matters for which we make critical accounting estimates in the preparation of our Condensed Consolidated Financial Statements during the three months ended July 3, 2015, as compared to those disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended April 3, 2015.
Recently issued authoritative guidance
See Note 1 of the Notes to Condensed Consolidated Financial Statements in this quarterly report for recently issued authoritative guidance, including the respective expected dates of adoption and effects on our results of operations and financial condition.
RESULTS OF OPERATIONS
The following table sets forth certain Consolidated Statements of Income data as a percentage of net revenue for the periods indicated:
|
| | | | | |
| Three Months Ended |
| July 3, 2015 | | July 4, 2014 |
Net revenue: | | | |
Content, subscription, and maintenance | 90 | % | | 91 | % |
License | 10 | % | | 9 | % |
Total net revenue | 100 | % | | 100 | % |
Cost of revenue: | | | |
Content, subscription, and maintenance | 15 | % | | 16 | % |
License | 1 | % | | 2 | % |
Amortization of intangible assets | 1 | % | | 1 | % |
Total cost of revenue | 17 | % | | 18 | % |
Gross profit | 83 | % | | 82 | % |
Operating expenses: | | | |
Sales and marketing | 35 | % | | 37 | % |
Research and development | 19 | % | | 18 | % |
General and administrative | 6 | % | | 6 | % |
Amortization of intangible assets | 1 | % | | 2 | % |
Restructuring, separation, and transition | 8 | % | | 1 | % |
Total operating expenses | 70 | % | | 64 | % |
Operating income | 13 | % | | 19 | % |
Non-operating expense, net | 2 | % | | 1 | % |
The total percentages may not add due to rounding.
Total net revenue |
| | | | | | | | | | |
| Three Months Ended |
| July 3, 2015 | | July 4, 2014 | | % Change |
| (Dollars in millions) |
Content, subscription, and maintenance revenue | $ | 1,352 |
| | $ | 1,574 |
| | (14 | )% |
License revenue | 147 |
| | 161 |
| | (9 | )% |
Total | $ | 1,499 |
| | $ | 1,735 |
| | (14 | )% |
Content, subscription, and maintenance revenue represented 90% and 91% of total net revenue for the three months ended July 3, 2015 and July 4, 2014, respectively. Content, subscription, and maintenance revenue decreased $222 million primarily due to unfavorable foreign currency fluctuations of approximately $102 million, the additional week in the quarter ended July 4, 2014 and declines in our consumer security products driven by our channel strategy to exit certain high-cost OEM arrangements and changes to our renewal practices. License revenue decreased $14 million primarily due to unfavorable foreign currency fluctuations of approximately $13 million.
Net revenue and operating income by segment
|
| | | | | | | | | | |
| Three Months Ended |
| July 3, 2015 | | July 4, 2014 | | % Change |
| (Dollars in millions) |
Total net revenue: | | | | | |
Consumer Security | $ | 430 |
| | $ | 533 |
| | (19) | % |
Enterprise Security | 482 |
| | 552 |
| | (13) | % |
Information Management | 587 |
| | 650 |
| | (10) | % |
Percentage of total net revenue: | | | | | |
Consumer Security | 29 | % | | 31 | % | | |
Enterprise Security | 32 | % | | 32 | % | | |
Information Management | 39 | % | | 37 | % | | |
Operating income: | | | | | |
Consumer Security | $ | 245 |
| | $ | 268 |
| | (9) | % |
Enterprise Security | 30 |
| | 70 |
| | (57) | % |
Information Management | 135 |
| | 89 |
| | 52 | % |
Operating margin: | | | | | |
Consumer Security | 57 | % | | 50 | % | | |
Enterprise Security | 6 | % | | 13 | % | | |
Information Management | 23 | % | | 14 | % | | |
Consumer Security revenue decreased $103 million primarily due to the impact of the additional week in the quarter ended July 4, 2014 and unfavorable foreign currency fluctuations of approximately $34 million. In addition, Consumer Security revenue decreased due to our channel strategy to exit unprofitable retail arrangements and certain high-cost OEM arrangements, coupled with the impact of our decision to change our renewal practices. Consumer Security operating income decreased $23 million primarily due to the decrease in revenue, partially offset by decreases in cost of revenue, salaries and wages and marketing expenses.
Enterprise Security revenue decreased $70 million primarily due to the impact of the additional week in the quarter ended July 4, 2014 and unfavorable foreign currency fluctuations of approximately $36 million. The decrease of $40 million in operating income was mainly due to the reduction in revenue which was partially offset by decreased headcount related expenses.
Information Management revenue decreased $63 million primarily due to unfavorable foreign currency fluctuations of approximately $45 million and the impact of the additional week in the quarter ended July 4, 2014. In addition, strong performance from NetBackup products was partially offset by weakness in Backup Exec and our storage management offerings. Information Management operating income increased $46 million driven by decreased headcount related expenses which was partially offset by the decrease in revenue.
Net revenue by geographic region |
| | | | | | | | | | |
| Three Months Ended |
| July 3, 2015 | | July 4, 2014 | | % Change |
| (Dollars in millions) |
Revenue by geographic region: | | | | | |
Americas (U.S., Canada and Latin America) | $ | 855 |
| | $ | 940 |
| | (9 | )% |
EMEA (Europe, Middle East, Africa) | 391 |
| | 495 |
| | (21 | )% |
Asia Pacific/Japan | 253 |
| | 300 |
| | (16 | )% |
Total net revenue | $ | 1,499 |
| | $ | 1,735 |
| | (14 | )% |
| | | | | |
U.S. | 767 |
| | 832 |
| | (8 | )% |
International | 732 |
| | 903 |
| | (19 | )% |
Total net revenue | $ | 1,499 |
| | $ | 1,735 |
| | (14 | )% |
| | | | | |
Percentage of total net revenue: | | | | | |
Americas (U.S., Canada and Latin America) | 57 | % | | 54 | % | | |
EMEA (Europe, Middle East, Africa) | 26 | % | | 29 | % | | |
Asia Pacific/Japan | 17 | % | | 17 | % | | |
U.S. | 51 | % | | 48 | % | | |
International | 49 | % | | 52 | % | | |
Fluctuations in the U.S. dollar compared to foreign currencies unfavorably impacted our international revenue by approximately $115 million for the three months ended July 3, 2015 as compared to the same period last year. Revenue for the EMEA and Asia Pacific and Japan regions was impacted by unfavorable foreign currency fluctuations of $87 million and $27 million, respectively.
Our international sales are expected to continue to be a significant portion of our revenue. As a result, revenue is expected to continue to be affected by foreign currency exchange rates as compared to the U.S. dollar. We are unable to predict the extent to which revenue in future periods will be impacted by changes in foreign currency exchange rates. If international sales become a greater portion of our total sales in the future, changes in foreign currency exchange rates may have a potentially greater impact on our revenue and operating results.
Cost of revenue |
| | | | | | | | | | |
| Three Months Ended |
| July 3, 2015 | | July 4, 2014 | | % Change |
| (Dollars in millions) |
Cost of content, subscription, and maintenance | $ | 219 |
| | $ | 269 |
| | (19 | )% |
Cost of license | 22 |
| | 27 |
| | (19 | )% |
Amortization of intangible assets | 13 |
| | 13 |
| | — | % |
Total | $ | 254 |
| | $ | 309 |
| | (18 | )% |
Cost of content, subscription, and maintenance consists primarily of technical support costs, costs of billable services, and fees to OEMs under revenue-sharing agreements. Cost of license consists primarily of royalties paid to third parties under technology licensing agreements, appliance manufacturing costs, and other direct material costs. Intangible assets are primarily comprised of developed technologies and patents from acquired companies. Our total cost of revenue decreased for the three months ended July 3, 2015 compared to the same period last year, primarily due to the additional week in the quarter ended July 4, 2014, decrease in OEM and other royalty fees and favorable foreign currency effects.
Operating expenses |
| | | | | | | | | | |
| Three Months Ended |
| July 3, 2015 | | July 4, 2014 | | % Change |
| (Dollars in millions) |
Sales and marketing expense | $ | 521 |
| | $ | 644 |
| | (19 | )% |
Research and development expense | 284 |
| | 308 |
| | (8 | )% |
General and administrative expense | 96 |
| | 103 |
| | (7 | )% |
Amortization of intangible assets | 19 |
| | 29 |
| | (34 | )% |
Restructuring, separation, and transition | 124 |
| | 20 |
| | 520 | % |
Total | $ | 1,044 |
| | $ | 1,104 |
| | (5 | )% |
We experienced favorable foreign currency effects on our operating expenses of approximately $40 million in the three months ended July 3, 2015 as compared to the same period last year.
Sales and marketing expense decreased $123 million primarily due to the additional week in the quarter ended July 4, 2014, lower salaries and wages due to lower headcount, and to a lesser extent, decreased advertising and promotion costs.
Research and development expense and general and administrative expense decreased $24 million and $7 million, respectively, primarily due to the additional week in the quarter ended July 4, 2014.
Amortization of intangible assets decreased $10 million primarily due to certain intangible assets becoming fully amortized during the year ended April 3, 2015.
Restructuring, separation, and transition costs include severance, facilities, separation, transition and other related costs. The charges for the three months ended July 3, 2015 primarily relate to our fiscal 2015 restructuring and separation plan initiated in connection with our plans to separate our business into two standalone companies, and transition costs related to the implementation of a new enterprise resource planning system for the information management business. The charges for the three months ended July 4, 2014 primarily relate to our fiscal 2014 restructuring plan which was substantially completed as of March 28, 2014. For further information on restructuring, separation, and transition, see Note 4 of the Notes to Condensed Consolidated Financial Statements in this quarterly report.
Non-operating expense, net
|
| | | | | | | | | | |
| Three Months Ended |
July 3, 2015 | | July 4, 2014 | | % Change |
| (Dollars in millions) |
Interest income | $ | 3 |
| | $ | 3 |
| | — | % |
Interest expense | (20 | ) | | (21 | ) | | (5 | )% |
Other (expense) income, net | (11 | ) | | 1 |
| | * |
|
Non-operating expense, net | $ | (28 | ) | | $ | (17 | ) | | 65 | % |
* Percentage is not meaningful.
Non-operating expense, net, increased $11 million primarily due to net foreign currency remeasurement loss.
Provision for income taxes
|
| | | | | | | | | | |
| Three Months Ended |
July 3, 2015 | | July 4, 2014 | | % Change |
| (Dollars in millions) |
Provision for income taxes | $ | 56 |
| | $ | 69 |
| | (19) | % |
Effective tax rate on earnings | 32 | % | | 23 | % | | 9 | % |
Our effective tax rate was approximately 32% and 23% for the three months ended July 3, 2015 and July 4, 2014, respectively. Our effective tax rate differs from the federal statutory income tax rate primarily due to the benefits of lower-taxed international earnings and domestic manufacturing incentives, partially offset by state income taxes. The higher effective tax rate for the three months ended July 3, 2015 as compared to the three months ended July 4, 2014 is due primarily to a different geographic mix of earnings and the treatment of certain transaction costs in determining the effective tax rate. The tax benefit associated with certain of these transaction costs will change as a result of the sale of the information management business. For additional information about the planned divestiture of our information management business see Note 11.
For the three months ended July 3, 2015 and July 4, 2014, the effective tax rate was reduced by tax benefits primarily resulting from settlements with certain taxing authorities and lapses of statutes of limitations of $3 million and $14 million, respectively. For the three months ended July 3, 2015, these tax benefits were offset as a result of certain transaction costs not fully deductible for tax purposes.
We are a U.S.-based multinational company subject to tax in multiple U.S. and international tax jurisdictions. A substantial portion of our international earnings were generated from subsidiaries organized in Ireland and Singapore. Our results of operations would be adversely affected to the extent that our geographical mix of income becomes more weighted toward jurisdictions with higher tax rates and would be favorably affected to the extent the relative geographic mix shifts to lower tax jurisdictions. Any change in our mix of earnings is dependent upon many factors and is therefore difficult to predict.
The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. Although potential resolution of uncertain tax positions involve multiple tax periods and jurisdictions, it is reasonably possible that the gross unrecognized tax benefits related to these audits could decrease (whether by payment, release, or a combination of both) in the next 12 months by $33 million, which could reduce our income tax provision and therefore benefit the resulting effective tax rate.
On July 27, 2015, the U.S. Tax Court invalidated a U.S. Treasury regulation requiring the inclusion of stock-based compensation in certain intercompany cost-sharing agreements. We are currently evaluating the impact of this decision on our current and historic tax filing positions. We continue to monitor the progress of ongoing income tax controversies and the impact, if any, of the expected tolling of the statute of limitations in various taxing jurisdictions.
LIQUIDITY AND CAPITAL RESOURCES
Planned divestiture of our information management business
On August 10, 2015, we entered into a definitive agreement to sell the assets of our information management business to Carlyle for cash consideration of approximately $8.0 billion and the assumption of certain liabilities. We are in the process of evaluating the transaction and its impact on our consolidated financial statements, including evaluating the resulting net gain and income tax expense that will be recognized, based on all the terms of the agreement. The Company's U.S. and foreign income taxes payable resulting from the transaction are estimated to range from $1.3 billion to $1.7 billion.
Sources of cash
We have historically relied on cash flow from operations, borrowings under a credit facility, and issuances of debt and equity securities for our liquidity needs. As of July 3, 2015, we had cash, cash equivalents and short-term investments of $3.9 billion and an unused credit facility of $1.0 billion, resulting in a liquidity position of approximately $4.9 billion. As of July 3, 2015, $2.3 billion in cash, cash equivalents, and short-term investments were held by our foreign subsidiaries. We have provided U.S. deferred taxes on a portion of our undistributed foreign earnings sufficient to address the incremental U.S. tax that would be due if we needed such portion of these funds to support our operations in the U.S.
Revolving Credit Facility. In fiscal 2011, we entered into a $1.0 billion senior unsecured revolving credit facility (“credit facility”), which was amended in fiscal 2013. The amendment extended the term of the credit facility to June 7, 2017. Under the terms of this credit facility, we must comply with certain financial and non-financial covenants, including a covenant to maintain a specified ratio of debt to EBITDA (earnings before interest, taxes, depreciation and amortization). As of July 3, 2015, we were in compliance with the required covenants, and no amounts were outstanding.
We believe that our existing cash and investment balances, our available revolving credit facility, our ability to issue new debt instruments, and cash generated from operations will be sufficient to meet our working capital and capital expenditure requirements, as well as to fund any cash dividends, principal and interest payments on debt, and repurchases of our stock, for at least the next 12 months and foreseeable future. Since the beginning of fiscal 2014, we have implemented a capital allocation strategy pursuant to which we expect to return over time approximately 50% of free cash flow to stockholders through a combination of dividends and share repurchases, while still enabling our company to invest in its future. Our strategy emphasizes organic growth through internal innovation and will be complemented by acquisitions that fit strategically and meet specific internal profitability hurdles.
Uses of cash
Our principal cash requirements include working capital, capital expenditures, payments of principal and interest on debt, and payments of taxes. Also, we may, from time to time, engage in the open market purchase of our notes prior to their maturity. Furthermore, our capital allocation strategy contemplates a quarterly cash dividend. In addition, we regularly evaluate our ability to repurchase stock, pay debts, and acquire other businesses.
Stock Repurchases. For the three months ended July 3, 2015, we repurchased approximately 4 million shares, or $90 million of our common stock. For the three months ended July 4, 2014, we repurchased 6 million shares, or $125 million, of our
common stock. The timing and amount of common shares purchased under our authorized stock repurchase programs will depend on various factors, including our business plans, financial performance and market conditions. On August 9, 2015, our Board of Directors authorized a new $1.5 billion stock repurchase program which commenced immediately and does not have an expiration date. This is in addition to the previous program with $1.1 billion remaining authorized for future repurchase as of July 3, 2015.
Dividend Program. During the three months ended July 3, 2015, we declared and paid aggregate cash dividends of $103 million or $0.15 per common share. During the three months ended July 4, 2014, we declared and paid cash dividends of $104 million or $0.15 per common share. Our restricted stock and performance-based stock units have dividend equivalent rights entitling holders to dividend equivalents to be paid in the form of cash upon vesting for each share of the underlying units.
On August 11, 2015, we declared a cash dividend of $0.15 per share of common stock to be paid on September 16, 2015 to all stockholders of record as of the close of business on August 26, 2015. All shares of common stock issued and outstanding, and unvested restricted stock and performance-based stock, as of the record date will be entitled to the dividend and dividend equivalents, respectively. Any future dividends and dividend equivalents will be subject to the approval of our Board of Directors.
Restructuring Plans. In fiscal 2015, we announced plans to separate our security and information management businesses into standalone companies. In order to separate the business, we initiated a restructuring plan to properly align personnel and expect to incur associated severance and facilities costs. We also expect to incur separation costs in the form of advisory, consulting and disentanglement expenses. These actions are expected to be substantially completed by the end of the third quarter of fiscal 2016. We expect to incur total severance and facilities costs between $165 million and $195 million. We expect to incur separation costs between $170 million and $190 million, excluding tax implications and potential advisor fees payable upon separation. Total restructuring and separation costs are expected to be between $335 million and $385 million. As of July 3, 2015, liabilities for excess facility obligations at several locations around the world are expected to be paid throughout the respective lease terms as we continue to occupy these facilities, the longest of which extends through fiscal 2019.
In fiscal 2013, we initiated a restructuring plan to reduce management and redundant personnel resulting in headcount reductions across the Company. As of July 3, 2015, the related costs for severance and benefits are substantially complete; however, we may experience immaterial adjustments to existing accruals in subsequent periods.
Note Repayment. In the second fiscal quarter of 2016, the principal balance of our 2.75% Senior Notes due September 2015 will mature and be settled by a cash payment of $350 million along with the $4.8 million semiannual interest payment.
Cash flows
The following table summarizes, for the periods indicated, selected items in our Condensed Consolidated Statements of Cash Flows: |
| | | | | | | |
| Three Months Ended |
| July 3, 2015 | | July 4, 2014 |
| (Dollars in millions) |
Net cash provided by (used in): | | | |
Operating activities | $ | 300 |
| | $ | 293 |
|
Investing activities | 37 |
| | (724 | ) |
Financing activities | (238 | ) | | (216 | ) |
Operating activities
We expect cash from our operating activities to fluctuate in future periods as a result of a number of factors, including the timing of our billings and collections, our operating results, the timing and amount of tax and other liability payments.
Net cash provided by operating activities was $300 million for the three months ended July 3, 2015, which resulted from net income of $117 million adjusted for non-cash items, including depreciation and amortization charges of $103 million and stock-based compensation expense of $53 million, as well as net changes in trade receivables resulting in inflows of $391 million. These amounts were partially offset by decreases in deferred revenue of $249 million and accrued compensation of $115 million.
Net cash provided by operating activities was $293 million for the three months ended July 4, 2014 which resulted from net income of $236 million adjusted for non-cash items, including depreciation and amortization charges of $117 million, as well as net changes in trade receivables resulting in inflows of $308 million. These amounts were partially offset by decreases in deferred revenue of $185 million, and accrued compensation of $34 million, as well as by a tax payment of $104 million related to a previous IRS audit.
Investing activities
Net cash provided by investing activities was $37 million for the three months ended July 3, 2015 and was primarily due to the proceeds of $298 million from maturities and sales of our short-term investments partially offset by purchases of $183 million of short-term investments and payments of $78 million for capital expenditures.
Net cash used in investing activities was $724 million for three months ended July 4, 2014 and was primarily due to the purchase of $712 million of short-term investments and payments of $92 million for capital expenditures, partially offset by $99 million in proceeds from maturities and sales of our short-term investments.
Financing activities
Net cash used in financing activities was $238 million for the three months ended July 3, 2015, which was primarily due to cash dividend and dividend equivalent payments of $107 million, repurchases of our common stock of $90 million, and tax payments related to restricted stock units of $33 million.
Net cash used in financing activities was $216 million for the three months ended July 4, 2014, which was primarily due to repurchases of our common stock of $125 million and cash dividends paid of $104 million, partially offset by net proceeds from sales of common stock through employee stock benefit plans of $23 million.
Contractual obligations
There have been no significant changes during the three months ended July 3, 2015 to the contractual obligations disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7, of our Annual Report on Form 10-K for the fiscal year ended April 3, 2015.
Indemnifications
In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, subsidiaries and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of agreements or representations and warranties made by us. In addition, our bylaws contain indemnification obligations to our directors, officers, employees and agents, and we have entered into indemnification agreements with our directors and certain of our officers to give such directors and officers additional contractual assurances regarding the scope of the indemnification set forth in our bylaws and to provide additional procedural protections. We maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and officers. It is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements might not be subject to maximum loss clauses. Historically, we have not incurred material costs as a result of obligations under these agreements and we have not accrued any liabilities related to such indemnification obligations in our Condensed Consolidated Financial Statements.
We provide limited product warranties and the majority of our software license agreements contain provisions that indemnify licensees of our software from damages and costs resulting from claims alleging that our software infringes on the intellectual property rights of a third party. Historically, payments made under these provisions have been immaterial. We monitor the conditions that are subject to indemnification to identify if a loss has occurred.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no significant changes in our market risk exposures during the three months ended July 3, 2015 as compared to the market risk exposures disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7A, of our Annual Report on Form 10-K for the fiscal year ended April 3, 2015.
Item 4. Controls and Procedures
a) Evaluation of Disclosure Controls and Procedures
The SEC defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our management (with the participation of our Chief Executive Officer and Chief Financial Officer) has conducted an evaluation of the
effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act). Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report.
b) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended July 3, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
c) Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information with respect to this Item may be found under the heading “Litigation contingencies” in Note 5 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q, which information is incorporated herein by reference.
Item 1A. Risk Factors
A description of the risks associated with our business, financial condition, and results of operations is set forth in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended April 3, 2015. There have been no material changes in our risks from such description.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Repurchases of our equity securities
All stock repurchases during the three months ended July 3, 2015 were purchased under publicly announced plans or programs and are summarized as follows:
|
| | | | | | | | | | |
| Total Number of Shares Purchased | | Average Price Paid per Share | | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs |
| (In millions, except per share data) |
April 4, 2015 to May 1, 2015 | 3.4 |
| | $ | 24.33 |
| | $ | 1,074 |
|
May 2, 2015 to May 29, 2015 | 0.3 |
| | $ | 25.14 |
| | $ | 1,068 |
|
May 30, 2015 to July 3, 2015 | — |
| | $ | — |
| | $ | 1,068 |
|
Total | 3.7 |
| | $ | 24.39 |
| | |
Through our stock repurchase programs we have repurchased shares on a quarterly basis since the fourth quarter of fiscal 2004. On August 9, 2015, our Board of Directors authorized a new $1.5 billion stock repurchase program which commenced immediately and does not have an expiration date. This is in addition to the previous program with $1.1 billion remaining authorized for future repurchase as of July 3, 2015.
Item 6. Exhibits
The information required by this Item is set forth in the Exhibit Index that follows the signature page of this Report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| | |
| SYMANTEC CORPORATION |
| (Registrant) |
| | |
| By: | /s/ Michael A. Brown |
| | Michael A. Brown President, Chief Executive Officer and Director |
| | |
| By: | /s/ Thomas J. Seifert |
| | Thomas J. Seifert Executive Vice President and Chief Financial Officer |
August 12, 2015
EXHIBIT INDEX
|
| | | | | | | | | | | | |
Exhibit Number | | | | Incorporated by Reference | | Filed with this 10-Q |
Exhibit Description | | Form | | File Number | | Exhibit | | File Date | |
3.01 | | Certificate of Designations of Series A Junior Preferred Stock of Symantec Corporation dated June 25, 2015 | | 8-K | | 000-17781 | | 3.1 | | 6/26/2015 | | |
10.01* | | FY16 Executive Annual Incentive Plan - President and Chief Executive Officer | | | | | | | | | | X |
10.02* | | FY16 Executive Annual Incentive Plan - Senior Vice President and Executive Vice President | | | | | | | | | | X |
10.03* | | Form of Symantec Corporation FY16 PRU Agreement | | | | | | | | | | X |
31.01 | | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | | | | | | | | | X |
31.02 | | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | | | | | | | | | X |
32.01† | | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | | | | | | | | | X |
32.02† | | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | | | | | | | | | X |
101.INS | | XBRL Instance Document | | | | | | | | | | X |
101.SCH | | XBRL Taxonomy Schema Linkbase Document | | | | | | | | | | X |
101.CAL | | XBRL Taxonomy Calculation Linkbase Document | | | | | | | | | | X |
101.DEF | | XBRL Taxonomy Definition Linkbase Document | | | | | | | | | | X |
101.LAB | | XBRL Taxonomy Labels Linkbase Document | | | | | | | | | | X |
101.PRE | | XBRL Taxonomy Presentation Linkbase Document | | | | | | | | | | X |
* Indicates a management contract or compensatory plan or arrangement.
| |
† | This exhibit is being furnished, rather than filed, and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K. |
FY16 Executive Annual Incentive Plan
President and Chief Executive Officer
This Executive Annual Incentive Plan (the “Plan”) of Symantec Corporation (the “Company”) is effective as of April 4, 2015. The Board of Directors (the “Board”) of the Company reserves the right to alter or cancel all or any portion of the Plan for any reason at any time.
FY16 Executive Annual Incentive Plan
|
| | |
Job Category: | | President and Chief Executive Officer |
| | |
Purpose: | | Provide critical focus on specific, measurable corporate goals and provide performance based compensation based upon the level of attainment of such goals. |
| | |
Bonus Target: | | The target incentive bonus, as expressed as a percentage of the base salary, and the annual base salary are determined by the Administrator at the beginning of the fiscal year. The Bonus will be calculated based on actual base salary earnings from time of eligibility under the Plan through April 1, 2016. Payment will be subject to applicable payroll taxes and withholdings. |
| | |
Bonus Payment: | | The annual incentive bonus will be paid once annually. Payment will be made within six weeks after the end of the fiscal year, but in the event the amount cannot be calculated within such six weeks, in no event may payment be made later than two and a half months after the end of the fiscal year. Payment made pursuant to this Plan is at the sole discretion of the Administrator of the Plan. |
| | |
Metrics: | | Two corporate performance metrics will be used in the determination of the annual incentive bonus payment as determined by the Administrator: non-GAAP Operating Income and non-GAAP Revenue. These two metrics will be equally weighted. Performance metric targets will be established for the entire duration of the fiscal year. For fiscal 2016, achievements against targets may be measured for 2 separate periods based on the timing of the separation of the Information Management Business during the fiscal year. Performance targets will be proportionately adjusted to account for the Information Management Business separation and actual achievements against targets will be measured separately for the 2 periods with the final pool funding level for the fiscal year determined based on the weighted average of the 2 such periods. |
| | |
Achievement Schedule: | | An established threshold must be exceeded for each of the applicable performance metrics before the portion of the bonus applicable to such performance metric will be paid. Payout levels will be determined for each metric in accordance with the payout slopes established and approved by the Administrator. Payouts under both metrics are capped. |
| | |
Pro-ration: | | The calculation of the annual incentive bonus will be determined, in part, based on eligible base salary earnings for the fiscal year and, subject to the eligibility requirements below, will be pro-rated based on the number of days the participant is actively employed as a regular status employee of the Company during the fiscal year. If a participant takes a leave of absence from the Company during the fiscal year, any payments received by the participant as an income protection benefit will not be counted toward base salary earnings for the purpose of bonus calculations. |
| | |
Eligibility: | | Participant must be a regular status employee on the day bonus checks are distributed to earn the bonus. If the Company grants an interim payment for any reason, the Participant must be a regular status employee at the end of the fiscal year in order to receive such payment. Ongoing contributions toward the Company’s overall success, particularly toward year end, is of particular business importance. As such, a participant who leaves before the end of the fiscal year will not be eligible to earn the annual incentive bonus or any pro-rated portion thereof. The Plan participant must be a regular status employee of the Company at the end of the fiscal year in order to be eligible to receive the annual incentive bonus and at the time the bonus checks are distributed, unless otherwise determined by the Administrator. |
| | |
| | To be eligible to participate in the Plan in the given fiscal year, participant must be in an eligible position for at least 60 days before the end of the Plan year. Employee hired into an eligible position with less than 90 days in the Plan year will not be eligible to participate in the annual bonus plan until the next fiscal year. |
| | |
Exchange Rates: | | The performance metrics targets will not be adjusted for any fluctuating currency exchange rates. However, when calculating achievement of performance metrics, foreign exchange movements are held constant at plan rates. |
|
| | |
Target Changes: | | In the event of an accretive event, such as a stock buyback, or other events that might have an effect on the revenue or operating income targets of the Company, such as acquisition or purchase of products or technology, the Administrator may at its discretion adjust the revenue and operating income metrics to reflect the potential impact upon the Company’s financial performance. |
| | |
Restatement of Financial Results: | | If the Company’s financial statements are the subject of a restatement due to error or misconduct, to the extent permitted by governing law, in all appropriate cases, the Company will seek reimbursement of excess incentive cash compensation paid under the Plan. For purposes of this Plan, excess incentive cash compensation means the positive difference, if any, between (i) the incentive bonus paid and (ii) the incentive bonus that would have been made had the performance metrics been calculated based on the Company’s financial statements as restated. The Company will not be required to award Participant an additional Payment should the restated financial statements result in a higher bonus calculation. |
| | |
Plan Provisions: | | This Plan is adopted under the Symantec Senior Executive Incentive Plan, as amended and restated on October 22, 2013 and approved by the Company’s stockholders on October 22, 2013 (the “SEIP”). All capitalized terms in this Plan shall have the meaning assigned to them in the SEIP. |
| | |
| | This Plan supersedes the FY15 Executive Annual Incentive Plan, dated March 29, 2014, which is null and void as of the adoption of this Plan. |
| | |
| | Participation in the Plan does not guarantee participation in other or future incentive plans, nor does it guarantee continued employment for a specified term. Plan structures and participation will be determined on a year-to-year basis. |
| | |
| | The Board reserves the right to alter or cancel all or any portion of the Plan for any reason at any time. The Plan shall be administered by the independent members of the Board (the “Administrator”), and the Administrator shall have all powers and discretion necessary or appropriate to administer and interpret the Plan. |
| | |
| | The Board reserves the right to exercise its own judgment with regard to company performance in light of events outside the control of management and/or participant. |
FY16 Executive Annual Incentive Plan
Senior Vice President and
Executive Vice President
This Executive Annual Incentive Plan (the “Plan”) of Symantec Corporation (the “Company”) is effective as of April 4, 2015. The Board of Directors (the “Board”) of the Company reserves the right to alter or cancel all or any portion of the Plan for any reason at any time.
FY16 Executive Annual Incentive Plan
|
| | |
Job Category: | | Senior Vice President and Executive Vice President |
| | |
Purpose: | | Provide critical focus on specific, measurable corporate and division goals and provide performance-based compensation based upon the level of attainment of such goals. |
| | |
Bonus Target: | | The target incentive bonus, as expressed as a percentage of base salary, is determined based on the executive’s position. Annual base salary has been established at the beginning of the fiscal year. Bonuses will be calculated based on actual base salary earnings from time of eligibility under the Plan through April 1, 2016. (Base salary earnings for the purpose of this Plan do not include any PTO accrual payments.) Payments will be subject to applicable payroll taxes and withholdings. |
| | |
Bonus Payments: | | The annual incentive bonus will be paid once annually. Payment will be made within six weeks after the end of the fiscal year but in the event the amount cannot be calculated within such six weeks in no event may payments be made later than two and a half months after the end of the fiscal year. Payments made pursuant to this Plan are at the sole discretion of the Administrator of the Plan. |
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Bonus Pool Funding: | | Two corporate performance metrics will be used to calculate the annual incentive bonus pool funding as determined by the Administrator: non-GAAP Operating Income and non-GAAP Revenue. These two metrics will be equally weighted to fund the pool. Performance metric targets will be established for the entire duration of the fiscal year. For fiscal 2016, achievements against targets may be measured for 2 separate periods based on the timing of the separation of the Information Management Business during the fiscal year. Performance targets will be proportionately adjusted to account for the Information Management Business separation and actual achievements against targets will be measured separately for the 2 periods with the final pool funding level for the fiscal year determined based on the weighted average of the 2 such periods. |
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Achievement Schedule: | | An established threshold must be exceeded for each of the applicable performance metrics before the portion of the bonus pool applicable to such performance metric will be funded. Funding levels will be determined for each metric in accordance with the funding payout slopes established and approved by the Administrator. Funding levels for both metrics are capped. |
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| | The individual payout amount will be determined based on the assessment of individual performance against a set of financial, non-financial, individual, and team-based goals and will be allocated from the bonus pool as a percent of the individual’s bonus target. |
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| | The Administrator and the President and Chief Executive Officer reserve the right to determine final payout level for the individual performance factor metric. However, only the Administrator determines the final payout level for the individual performance factor metric for the executive officers. |
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Pro-ration: | | The calculation of the annual incentive bonus will be determined, in part, based on eligible base salary earnings for the fiscal year and, subject to the eligibility requirements below, will be pro-rated based on the number of days the participant is actively employed as a regular status employee of the Company during the fiscal year. If a participant takes a leave of absence from the Company during the fiscal year, any payments received by the participant as an income protection benefit will not be counted toward base salary earnings for the purpose of bonus calculations. |
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Eligibility: | | Participants must be regular status employees on the day bonus checks are distributed to earn the bonus. If the Company grants an interim payment for any reason, the Participant must be a regular status employee at the end of the fiscal year in order to receive such payment. Ongoing contributions toward the Company’s overall success, particularly toward year end, is of particular business importance. As such, a participant who leaves before the end of the fiscal year will not be eligible to earn the annual incentive bonus or any pro-rated portion thereof. The Plan participant must be a regular status employee of the Company at the end of the fiscal year in order to be eligible to receive the annual incentive bonus and at the time the bonus checks are distributed, unless otherwise determined by the Administrator. |
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| | To be eligible to participate in the Plan in the given fiscal year, participants must be in an eligible position for at least 60 days before the end of the Plan year. Employees hired into an eligible position with less than 90 days in the Plan year will not be eligible to participate in the annual bonus plan until the next fiscal year. |
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Exchange Rates: | | The performance metrics targets will not be adjusted for any fluctuating currency exchange rates. However, when calculating achievement of performance metrics, foreign exchange movements are held constant at plan rates. |
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Target Changes: | | In the event of an accretive event, such as a stock buyback, or other events that might have an effect on the revenue or operating income targets of the Company, such as acquisition or purchase of products or technology, the Administrator may at its discretion adjust the revenue and operating income metrics to reflect the potential impact upon the Company’s financial performance. |
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Restatement of Financial Results: | | If the Company’s financial statements are the subject of a restatement due to error or misconduct, to the extent permitted by governing law, in all appropriate cases, the Company will seek reimbursement of excess incentive cash compensation paid under the Plan. For purposes of this Plan, excess incentive cash compensation means the positive difference, if any, between (i) the incentive bonus paid and (ii) the incentive bonus that would have been made had the performance metrics been calculated based on the Company’s financial statements as restated. The Company will not be required to award Participant an additional Payment should the restated financial statements result in a higher bonus calculation. |
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Plan Provisions: | | This Plan is adopted under the Symantec Senior Executive Incentive Plan, as amended and restated on October 22, 2013 and approved by the Company’s stockholders on October 22, 2013 (the “SEIP”). All capitalized terms in this Plan shall have the meaning assigned to them in the SEIP. |
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| | This Plan supersedes the FY15 Executive Annual Incentive Plan dated March 29, 2014, which is null and void as of the adoption of this Plan. |
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| | Participation in the Plan does not guarantee participation in other or future incentive plans, nor does it guarantee continued employment for a specified term. Plan structures and participation will be determined on a year-to-year basis. |
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| | The Board reserves the right to alter or cancel all or any portion of the Plan for any reason at any time. The Plan shall be administered by the Compensation and Leadership Development Committee of the Board (the “Administrator”), and the Administrator shall have all powers and discretion necessary or appropriate to administer and interpret the Plan. |
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| | The Board reserves the right to exercise its own judgment with regard to company performance in light of events outside the control of management and/or participant. |
SYMANTEC CORPORATION
PERFORMANCE BASED RESTRICTED STOCK UNIT
AWARD AGREEMENT
RECITALS
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A. | The Board has adopted the Plan for the purpose of providing incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of Symantec Corporation (the “Company”) and its Subsidiaries and Affiliates. |
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B. | The Participant is to render valuable services to the Company and/or its Subsidiaries and Affiliates, and this Performance Based Restricted Stock Unit Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Company’s issuance of rights in respect of Common Stock in the form of Performance Based Restricted Stock Units (each, a “PRU”). |
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C. | All capitalized terms in this Agreement shall have the meaning assigned to them in Appendix A or B attached hereto. All undefined terms shall have the meaning assigned to them in the Plan. |
NOW, THEREFORE, it is hereby agreed as follows:
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1. | Grant of Performance Based Restricted Stock Units. The Company hereby awards to the Participant PRUs under the Plan. Each PRU represents the right to receive one share of Common Stock on vesting based on achievement of the performance objectives set forth in Appendix B (each, a “Share”), subject to the provisions of this Agreement (including any Appendices hereto). The number of shares of Common Stock subject to this Award, the applicable vesting schedule for the PRUs and the Shares, the dates on which those vested Shares shall be issued to Participant and the remaining terms and conditions governing this Award shall be as set forth in this Agreement (including any Appendices hereto). |
AWARD SUMMARY
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Award Date and Number of Shares Subject to Award: | As set forth in the Notice of Grant of Award (the “Notice of Grant”). |
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Vesting Schedule: | The Shares shall vest pursuant to the schedule set forth on Appendix B hereto.
Subject to the provisions of Appendix B hereto, the Shares that may be earned on each applicable vesting date shall vest on that date only if the employment of the Participant has not Terminated as of such date, and no additional Shares shall vest following the Participant’s Termination. |
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Issuance Schedule | The Shares in which the Participant vests shall be issuable as set forth in Paragraph 6. However, the actual number of vested Shares to be issued will be subject to the provisions of Paragraph 7 (pursuant to which the applicable withholding taxes are to be collected) and Appendix B. |
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2. | Limited Transferability. This Award, and any interest therein, shall not be transferable or assignable by the Participant, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution or as consistent with this Agreement and the Plan. |
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3. | Cessation of Service. Subject to the provisions of Appendix B hereto, should the Participant’s service as an employee, director, consultant, independent contractor or advisor to the Company or a Parent, Subsidiary or an Affiliate of the Company be Terminated for any reason (whether or not in breach of local labor laws) prior to vesting in one or more Shares subject to this Award, then the PRUs covering such unvested Shares will be immediately thereafter cancelled, the Participant shall cease to have any right or entitlement to receive any Shares under those cancelled PRUs and the Participant’s right to receive PRUs and vest under the Plan, if any, will terminate effective as of the date that the Participant is no longer actively providing service. For purposes of service, transfer of employment between the Company and any Subsidiary or Affiliate shall not constitute Termination of Service. The Committee shall have the exclusive discretion to determine when the Participant is no longer actively providing service for purposes of the Plan. |
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4. | Corporate Transaction. Subject to the provisions of Appendix B hereto: |
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a. | In the event of a Corporate Transaction, any or all outstanding PRUs subject to this Agreement may be assumed, converted or replaced by the successor corporation (if any), which assumption, conversion or replacement will be binding on the Participant, or the successor corporation may substitute an equivalent award or provide substantially similar consideration to the Participant as was provided to stockholders (after taking into account the existing provisions of the PRUs). |
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b. | In the event such successor corporation (if any) fails to assume this Award or substitute an equivalent award (as provided in Paragraph 4(a) above) pursuant to a Corporate Transaction, this Award will expire on such transaction at such time and on such conditions as the Board shall determine. |
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c. | Any action taken pursuant to clauses (a) or (b) above must either (i) preserve the exemption of these PRUs from Section 409A of the Code or (ii) comply with Section 409A of the Code. |
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d. | This Agreement shall not in any way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. |
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5. | Adjustment in Shares. Should any change be made to the Common Stock by reason of any stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration or if there is a change in the corporate structure, then appropriate adjustments shall be made to the total number and/or class of securities issuable pursuant to this Award in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder. |
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6. | Issuance of Shares of Common Stock. |
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a. | As soon as practicable following the applicable vesting date of any portion of the PRU (including the date (if any) on which vesting of any portion of this PRU accelerates), the Company shall issue to or on behalf of the Participant a certificate (which may be in electronic form) for the applicable number of underlying shares of Common Stock that so vested, subject, however, to the provisions of Paragraph 7 pursuant to which the applicable withholding taxes are to be collected. In no event shall the date of settlement (meaning the date that shares of Common Stock are issued) be later than two and one half (2½) months after the later of (i) the end of the Company’s fiscal year in which the applicable vesting date occurs or (ii) the end of the calendar year in which the applicable vesting date occurs. |
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b. | If the Company determines that the Participant is a “specified employee,” as defined in the regulations under Section 409A of the Code, at the time of the Participant’s “separation from service,” as defined in those regulations, then any units that otherwise would have been settled during the first six months following the Participant’s separation from service will instead be settled during the seventh month following the Participant’s separation from service, unless the settlement of those units is exempt from Section 409A of the Code. |
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c. | In no event shall fractional Shares be issued. |
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d. | The holder of this Award shall not have any stockholder rights, including voting rights, with respect to the Shares subject to the PRUs until the Award holder becomes the record holder of those Shares following their actual issuance and after the satisfaction of the Tax Obligations (as defined below). |
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7. | Tax Obligations. The Participant hereby agrees to make adequate provision for any sums required to satisfy the applicable federal, state, local and foreign employment, social insurance, payroll, income and other tax withholding obligations of the Company or any Affiliate (the “Tax Obligations”) that arise in connection with this Award. The satisfaction of the Tax Obligations shall occur at the time the Participant receives a distribution of Common Stock or other property pursuant to this Award, or at any time prior to such time or thereafter as reasonably requested by the Company and/or any Affiliate in accordance with applicable law. The Participant hereby authorizes the Company, at its sole discretion and subject to any limitations under applicable law, to satisfy any such Tax Obligations by any of the following methods: (1) in the event the PRU is to be settled in part in cash rather than settled in full in Shares, withholding from the cash to be distributed to the Participant in settlement of this Award, (2) permitting the Participant to enter into a “same day sale” commitment with a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD Dealer”) whereby the Participant irrevocably elects to sell a portion of the Shares to be delivered under the Award to satisfy the applicable Tax Obligations and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the proceeds necessary to satisfy the Tax Obligations directly to the Company and/or its Affiliates, and (3) withholding Shares that are otherwise to be issued and delivered to the Participant under this Award in satisfaction of the Tax Obligations; provided, however, that the amount of the Shares so withheld pursuant to alternative (3) shall not exceed the amount necessary to satisfy the required Tax Obligations using the minimum statutory withholding rates that are applicable to this kind of income. In addition, to the extent this Award is not settled in cash, the Company is authorized to satisfy any Tax Obligations by withholding for the Tax Obligations from wages and other cash compensation payable to the Participant or by causing the Participant to tender a cash payment to the Company if the Committee determines in good faith at the time the Tax Obligations arises that withholding pursuant to the foregoing alternatives (2) and (3) above are not in the best interest of the Company or the Participant. In the event the Tax Obligations arises prior to the delivery to the Participant of Common Stock or it is determined after the delivery of Shares or other property that the amount of the Tax Obligations was greater than the amount withheld by the Company and/or any Affiliate, the Participant shall indemnify and hold the Company and its Affiliates harmless from any failure by the Company and/or any Affiliate to withhold the proper amount. The Company may refuse to deliver the Shares if the Participant fails to comply with the Participant’s obligations in connection with the Tax Obligations as described in this Paragraph 7. |
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8. | Compliance with Laws and Regulations. |
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a. | The issuance of shares of Common Stock pursuant to the PRU shall be subject to compliance by the Company and the Participant with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange (or an established market, if applicable) on which the Common Stock may be listed for trading at the time of such issuance. |
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b. | The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance of any Common Stock hereby shall relieve the Company of any liability with respect to the non-issuance of the Common Stock as to which such approval shall not have been obtained. The Company, however, shall use its best efforts to obtain all such approvals. |
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9. | Successors and Assigns. Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and Participant, Participant’s assigns, the legal representatives, heirs and legatees of Participant’s estate and any beneficiaries designated by Participant. |
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10. | Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices. Any notice required to be given or delivered to Participant shall be in writing and addressed to Participant at the address indicated below Participant’s signature line on this Agreement (as may be updated from time to time by written notice from the Participant). All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified. |
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11. | Construction. This Agreement and the Notice of Grant evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. In the event of any conflict between the terms of this Agreement and the Plan, the terms of the Plan shall apply. All decisions of the Committee with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in the PRU. |
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12. | Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of California without resort to that State’s conflict-of-laws rules. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or the Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of Santa Clara County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this grant is made and/or to be performed. |
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13. | Excess Shares. If the Shares covered by this Agreement exceed, as of the date the PRU is granted, the number of shares of Common Stock which may without stockholder approval be issued under the Plan, then the Award shall be void with respect to those excess Shares, unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan. |
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14. | Employment at Will. Nothing in this Agreement or in the Plan shall confer upon Participant any right to continue in the employment of the Company for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining Participant) or of Participant, which rights are hereby expressly reserved by each, to terminate Participant’s service with the Company at any time for any reason, with or without cause. |
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15. | Severability. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable. |
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16. | Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan, PRUs granted under the Plan or future PRUs that may be granted under the Plan (including, without limitation, disclosures that may be required by the Securities and Exchange Commission) by electronic means or to request Participant’s consent to participate in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company. |
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17. | Imposition of Other Requirements. The Company reserves the right to impose other requirements on Participant’s participation in the Plan, on the Award and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require me to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. |
IN WITNESS WHEREOF, the parties have executed this Agreement on this ____ date of ____________, 201__.
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SYMANTEC CORPORATION |
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By: | |
Title: | |
Address: | |
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PARTICIPANT |
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Signature: | |
Address: | |
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APPENDIX A
DEFINITIONS
The following definitions shall be in effect under the Agreement:
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1. | Agreement shall mean this Performance Based Restricted Stock Unit Award Agreement. |
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2. | Award shall mean the award of PRUs made to the Participant pursuant to the terms of this Agreement. |
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3. | Award Date shall mean the date the PRUs are granted to Participant pursuant to the Agreement and shall be the date indicated in the Notice of Grant. |
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4. | Code shall mean the Internal Revenue Code of 1986, as amended. |
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5. | Committee shall mean the Compensation and Leadership Development Committee of the Company Board of Directors. |
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6. | Corporate Transaction shall mean |
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a. | a dissolution or liquidation of the Company, |
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b. | a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a different jurisdiction, or other transaction in which there is no substantial change in the stockholders of the Company or their relative stock holdings and the Awards granted under the Plan are assumed, converted or replaced by the successor corporation, which assumption will be binding on all Participants), |
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c. | a merger in which the Company is the surviving corporation but after which the stockholders of the Company (other than any stockholder which merges (or which owns or controls another corporation which merges) with the Company in such merger) cease to own their shares or other equity interests in the Company, |
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d. | the sale of substantially all of the assets of the Company, or |
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e. | any other transaction which qualifies as a "corporate transaction" under Section 424(a) of the Code wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of the Company from or by the stockholders of the Company). |
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7. | Common Stock shall mean shares of the Company’s common stock, par value $0.01 per share. |
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8. | Notice of Grant shall mean such notice as provided by the Stock Administration Department of the Company, or such other applicable department of the Company, providing Participant with notice of the issuance of a PRU award pursuant to the Plan and terms of this Agreement. |
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9. | Participant shall mean the person named in the Notice of Grant relating to the PRUs covered by this Agreement. |
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10. | Plan shall mean the Company’s 2013 Equity Incentive Plan, as the same may be amended from time to time. |
APPENDIX B
PERFORMANCE SCHEDULE
The number of PRUs that will be earned shall be based on the metrics set forth below. Terms not otherwise defined in Appendix A or B shall have the meaning ascribed to them in the Plan.
1. Grant of Performance Based Restricted Stock Units.
Subject to the terms and conditions of Agreement, the Notice of Grant and of the Plan, the Company hereby grants to the Employee a number of PRUs set forth in the Notice of Grant, subject to reduction and vesting as set forth below.
2. Primary Metric.
The Employee can earn the PRUs based on the Company’s performance in (a) achieving three quarter EPS, and (b) achieving TSR over a two-year period, with EPS being measured at the end of the third fiscal quarter of the first year of the Performance Period (as defined below) against the Annual Target Long Term Incentive Grant and TSR being measured at the end of year two and year three (with such measurements being year two for the second year TSR measurement period and years two through three for the third year TSR measurement period, with such three-year period described as the Vesting Schedule in the Notice of Grant and hereafter referred to as the “Performance Period”). For purposes of clarity, no PRUs will be earned until the end of the three-year performance period, subject to the provisions of Sections 4 and 5 below. The goals (including the associated threshold, target and maximum levels with respect thereto) associated with this PRU are established by the Committee and will be communicated by the Company.
The number of PRUs determined at the at end of the first three quarters of the first year of the Performance Period will range from 0% to 133% of the Annual Target Long Term Incentive Grant as determined by the Committee after the end of the first three quarters of the first year of the Performance Period based upon the Company’s achievement of the EPS goal, as follows: 0% if performance is below the threshold level, 50% if performance is at the threshold level, 100% if performance is at target and 133% if performance is at or above the maximum level. For EPS performance between the threshold level and the maximum level, a proportionate fraction of the Annual Target Long Term Incentive Grant between 50% and 133% will be applied based on performance between threshold and maximum levels. The number of PRUs credited to the Employee at the end of the first three quarters of the first year of the Performance Period is the “Conditional PRU Award.”
3. TSR Modifier.
At the end of the second year of the Performance Period and the end of the third year of the Performance Period, the TSR modifier will be applied to the Reference Amount (as defined below), as set forth in Section 3 below, in each case as reviewed and approved by the Committee. No PRUs are awarded if at the end of the first three quarters of the first year of the Performance Period the Company’s achievement of the EPS goal is less than the threshold level determined by the Committee. Subject to the provisions of Sections 4 and 5 below, no PRUs shall become earned unless the employee is employed by the Company on the last day of the 3 year Performance Period.
Application of Modifier:
(a) Following the completion of the applicable Performance Period, the Conditional PRU Award will be adjusted by the TSR modifier to be determined by the Committee based on the performance criteria set forth below. A Participant’s earned PRU award (if any) shall be equal to the Reference Amount multiplied by the TSR modifier for the applicable Performance Period after completion thereof, as reviewed and approved by the Committee.
The TSR modifier will be as follows based on the Company’s one and two year performance (with TSR measurements being made at the end of the second year Performance Period measuring year two, and at the end of the third year of the Performance Period, measuring years two through three) as measured against the one-year and two-year performance of the companies comprising the S&P 500 over the same period (with the S&P 500 being comprised of those companies that make up the S&P 500 index at the end of the applicable Performance Period): 50% if performance is at or below the threshold level, 100% if performance is at target and 150% if performance is at or above the maximum level. For performance between the threshold level and target level, a proportionate fraction of the TSR modifier between 50% and 100% will be applied, and for performance between the target level and the maximum level, a proportionate fraction of the TSR modifier between 100% and 150% will be applied. TSR performance versus the S&P 500 will be calculated as the 30 calendar day average of the Company’s stock price as calculated at the beginning of the applicable Performance Period and end of the applicable Performance Period.
In no event shall more than the number of PRUs set forth in the Notice of Grant be eligible to be earned pursuant to this Agreement and the Notice of Grant.
4. Change of Control.
In the event of a Change of Control of the Company (as defined in the Executive Retention Plan (as defined below)) before the end of the first year of the Performance Period, then the Annual Target Long Term Incentive Grant shall be subject, to the extent applicable, to the acceleration provisions of Section 1 of the Executive Retention Plan (as well as all other provisions of such plan, including Section 3 thereof).
In the event of a Change of Control of the Company (as defined in the Executive Retention Plan) after the end of the first year of the Performance Period but prior to the end of the third year of the Performance Period, then the Conditional PRU Award shall be subject, as applicable, to the acceleration provisions of Section 1 of the Executive Retention Plan (as well as all other provisions of such plan, including Section 3 thereof).
5. Death, Disability and Involuntary Termination.
If a Participant’s employment with the Company (or any majority or greater owned subsidiary) terminates by reason of death, total and permanent disability or an involuntary termination other than for Cause (as defined below) after the end of the first year of the Performance Period but prior to the end of the third year of the Performance Period, then the Participant shall be entitled to payment of a prorated number of PRUs, as follows:
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(1) | If the Participant’s termination occurs after the end of the first year of the Performance Period and prior to the end of the second year of the Performance Period, then the number of PRUs earned by the Participant shall equal the product of (A) the Conditional PRU Award multiplied by (B) the Proration Factor. |
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(2) | If the Participant’s termination occurs after the end of the second year of the Performance Period but prior to the end of the third year of the Performance Period, then the number of PRUs earned by the Participant shall equal to (A) two (2) times (B) the product of (i) the TSR modifier for the second year of the Performance Period multiplied by (ii) the Reference Amount for the two-year performance period related to such TSR modifier times (C) the Proration Factor. |
Any prorated PRU amounts pursuant to this Section 5 shall be earned by the Participant on his or her termination date and settled as soon as administratively practicable thereafter, but in no event later than the fifteenth (15th) day of the third (3rd) calendar month following such termination date. In no event, however, will any prorated number of PRUs be earned by the Participant if (i) achievement of the EPS goal is below the threshold level (i.e., if the Conditional PRU Award is zero), (ii) if the Participant’s service to the Company (or any of its majority or greater owned subsidiaries) terminates for any reason prior to the end of the first year of the Performance Period, or (iii) if the Participant voluntarily leaves the employ of the Company (or any of its majority or greater owned subsidiaries) prior to the end of the third year of the Performance Period.
6. Restatement of Financial Results
If the Company’s financial statements are the subject of a restatement due to error or misconduct, to the extent permitted by governing law, in all appropriate cases, the Company will seek reimbursement of excess PRUs (as defined below), if any, earned by the Participant hereunder. For purposes of this Agreement, “excess PRUs” means the positive difference, if any, between (i) the number of PRUs earned by the Participant and (ii) the number of PRUs that would have been earned by that Participant had achievement of the EPS goal been determined based on the Company’s financial statements as restated. The Company shall not award any Participant any additional PRUs should the restated financial statements result in a higher PRU award.
7. Definitions
(a) Annual Target Long Term Incentive Grant shall mean the number of shares of Common Stock associated with the annual PRU grant as determined by the Committee.
(b) Cause shall mean the dismissal or discharge of a Participant from employment for one or more of the following reasons or actions: (i) gross negligence or willful misconduct in the performance of duties to the Company (other than as a result of a disability) that has resulted or is likely to result in substantial and material damage to the Company, after a demand for substantial performance is delivered by the Company which specifically identifies the manner in which it believes the individual has not substantially performed his/her duties and provides the individual with a reasonable opportunity to cure any alleged gross negligence or willful misconduct; (ii) commission of any act of fraud with respect to the Company or its affiliates; or (iii) conviction of a felony or a crime involving moral turpitude causing material harm to the business and affairs of the Company.
(c) EPS shall mean the diluted net income per share attributable to Symantec Corporation stockholders reflected in the Company’s condensed consolidated statements of income as adjusted for the following items: business combination accounting entries, stock-based compensation expense, restructuring charges, charges related to the amortization of intangible assets and acquired product rights, impairments of assets and certain other items that are not included in the Company’s non-GAAP results. For this purpose, EPS shall be computed in the manner consistent with the annual financial plan presented to and approved by the Board of Directors, as well as the quarterly financial results presented to the Audit Committee of the Board of Directors.
(d) Executive Retention Plan shall mean the Symantec Executive Retention Plan as in effect on the date of this Agreement and as hereafter amended from time to time.
(e) Proration Factor shall mean a quotient, the numerator of which is the number of calendar months rounded up to the next whole month) the Participant was in the employ of the Company (or any majority or greater owned subsidiary) during the period commencing with the start of the three-year Performance Period and ending with his or her termination date, and the denominator of which is thirty-six (36) months.
(f) Reference Amount shall mean fifty percent (50%) of the Conditional PRU Award; provided, however, that if the TSR performance at the end of the second year of the Performance Period is not equal to or greater than the target level established by the Committee for the Performance Period then ended, then the Reference Amount for the three-year Performance Period shall be equal to the sum of (i) fifty percent (50%) of the Conditional PRU Award, plus (ii) the difference between the number of PRUs earned or awarded at the end of the second year of the Performance Period and fifty percent (50%) of the Conditional PRU Award.
(g) TSR shall mean the change in stock price over the performance period (measured using a 30 calendar day average stock price at the beginning and end of the respective Performance Period) plus the value of dividends provided in the respective period. The TSR results shall be expressed as an annualized return, or compound annual growth rate (CAGR).
APPENDIX C
ADDITIONAL PROVISIONS
1. Nature of the Grant. In signing this Agreement, the Participant acknowledges that:
a. the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan and this Agreement;
b. the grant of PRUs is voluntary and occasional and does not create any contractual or other right to receive future awards of PRUs, or benefits in lieu of PRUs even if PRUs have been awarded repeatedly in the past;
c. all decisions with respect to future grants of PRUs, if any, will be at the sole discretion of the Company;
d. the Participant’s participation in the Plan is voluntary;
e. the Participant’s participation in the Plan will not create a right to further employment with the Company or the Participant’s actual employer (the “Employer”) and shall not interfere with the ability of the Employer to terminate Participant’s service at any time with or without cause;
f. PRUs are an extraordinary item that do not constitute compensation of any kind for services of any kind rendered to the Company or to the Employer, and PRUs are outside the scope of the Participant’s employment contract, if any;
g. PRUs are not part of normal or expected compensation or salary for any purpose, including, but not limited to, calculation of any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments;
h. in the event that Participant is not an employee of the Company, the grant of PRUs will not be interpreted to form an employment contract or relationship with the Company; and furthermore, the grant of PRUs will not be interpreted to form an employment contract with the Employer or any Subsidiary or Affiliate of the Company;
i. the future value of the underlying Shares is unknown and cannot be predicted with certainty;
j. if the Participant receives Shares upon vesting, the value of such Shares acquired on vesting of PRUs may increase or decrease in value; and
k. in consideration of the grant of PRUs, no claim or entitlement to compensation or damages arises from termination of the PRUs or diminution in value of the PRUs or Shares received upon vesting of PRUs resulting from Termination of the Participant’s service by the Company or the Employer (for any reason whatsoever and whether or not in breach of local labor laws) and the Participant irrevocably releases the Company and the Employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, the Participant shall be deemed irrevocably to have waived his or her entitlement to pursue such claim.
2. Data Privacy Notice and Consent.
a. The Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of his or her personal data as described in this Agreement by and among, as applicable, the Employer, the Company, its Parent, its Subsidiaries and its Affiliates for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan.
b. The Participant understands that the Company and the Employer may hold certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all PRUs or any other entitlement to shares of Common Stock awarded, canceled, vested, unvested or outstanding in the Participant’s favor, for the purpose of implementing, administering and managing the Plan (“Data”).
c. The Participant understands that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the Participant’s country, or elsewhere, and that the recipient’s country may have different data privacy laws and protections than the Participant’s country. The Participant understands that he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. The Participant authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Participant’s participation in the Plan, including any requisite transfer of such Data as may be required to a broker, escrow agent or other third party with whom the Shares received upon vesting of the PRUs may be deposited. The Participant understands that Data will be held only as long as is necessary to implement, administer and manage his or her participation in the Plan. The Participant understands that he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. The Participant understands, however, that refusal or withdrawal of consent may affect his or her ability to participate in the Plan. For more information on the consequences of his or her refusal to consent or withdrawal of consent, the Participant understands that he or she may contact his or her local human resources representative.
3. Language. If the Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different than the English version, the English version will control.
CERTIFICATION
I, Michael A. Brown, certify that:
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1. | I have reviewed this quarterly report on Form 10-Q of Symantec Corporation; |
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2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 12, 2015
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| /s/ MICHAEL A. BROWN |
| Michael A. Brown |
| President, Chief Executive Officer and Director |
CERTIFICATION
I, Thomas J. Seifert, certify that:
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1. | I have reviewed this quarterly report on Form 10-Q of Symantec Corporation; |
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2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 12, 2015
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| /s/ THOMAS J. SEIFERT |
| Thomas J. Seifert |
| Executive Vice President and Chief Financial Officer |
Certification Pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
I, Michael A. Brown, President, Chief Executive Officer and Director of Symantec Corporation (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (i) the Company’s quarterly report on Form 10-Q for the period ended July 3, 2015, to which this Certification is attached (the “Form 10-Q”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and (ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 12, 2015
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| /s/ MICHAEL A. BROWN |
| Michael A. Brown |
| President, Chief Executive Officer and Director |
This Certification which accompanies the Form 10-Q is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.
Certification Pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
I, Thomas J. Seifert, Executive Vice President and Chief Financial Officer of Symantec Corporation (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (i) the Company’s quarterly report on Form 10-Q for the period ended July 3, 2015, to which this Certification is attached (the “Form 10-Q”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and (ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 12, 2015
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| /s/ THOMAS J. SEIFERT |
| Thomas J. Seifert |
| Executive Vice President and Chief Financial Officer |
This Certification which accompanies the Form 10-Q is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.
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