EX-99.1 2 f13995exv99w1.htm EXHIBIT 99.01 exv99w1
 

Exhibit 99.01
News Release
     
MEDIA CONTACT:
  INVESTOR CONTACT:
Kelly Schwager
  Helyn Corcos
Symantec Corporation
  Symantec Corporation
408-517-7329
  408-517-8324
kelly_schwager@symantec.com
  hcorcos@symantec.com
SYMANTEC REPORTS SOLID SECOND QUARTER EARNINGS
Results driven by large deals, demand for market-leading security and availability solutions
CUPERTINO, Calif. — Nov. 1, 2005 — Symantec Corp. (Nasdaq: SYMC) today reported results for the second quarter of fiscal year 2006, ended Sept. 30, 2005. GAAP revenue for the September 2005 quarter was $1.056 billion and non-GAAP revenue was $1.192 billion. Non-GAAP revenue includes $136 million of deferred revenue that has been eliminated from GAAP results as part of the purchase accounting associated with the acquisition of VERITAS Software Corporation. On a non-GAAP basis, revenue grew 8 percent over the September 2004 quarter’s combined non-GAAP revenue of $1.103 billion.
GAAP Results: The September quarter’s GAAP net loss was $251 million, resulting in fully diluted GAAP loss per share of $0.21. The loss was driven primarily by the write-off of $284 million in IPR&D expense associated with the acquisition of VERITAS, in addition to other merger-related acquisition and restructuring charges.
Non-GAAP Results: Non-GAAP net income was $273 million for the second quarter, 16 percent higher than the September 2004 quarter’s combined non-GAAP net income of $235 million. Non-GAAP fully diluted earnings per share for the quarter was $0.23, up 21 percent as compared to our combined non-GAAP earnings per share of $0.19 in the September 2004 quarter.
Non-GAAP results, as presented in the attached consolidated statements, exclude certain non-GAAP expenses, net of tax, and include VERITAS results of operations for the applicable periods, including adjustments based on the fair values of assets acquired and liabilities assumed as of the acquisition date of July 2, 2005, and deferred revenue that was eliminated as a result of purchase accounting for the VERITAS acquisition.
“We are very pleased with our first quarter of combined operations,” said John W. Thompson, Symantec chairman and chief executive officer. “Our team remained dedicated and focused on serving the needs of customers, resulting in solid September quarter results. We remain excited by the interest we’re seeing from both customers and partners around the world.”
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Symantec Reports Second Quarter Earnings
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Revenue Components
For the quarter, Symantec’s worldwide enterprise security business, which includes Symantec’s enterprise security solutions, as well as response and managed security services, represented 22 percent of total revenue and grew 11 percent on a combined non-GAAP basis year-over-year. Symantec’s storage management segment, which includes Symantec’s cloning and imaging products and VERITAS’ Foundation Suite and Utility Computing solutions, represented 21 percent of total revenue and grew on a combined non-GAAP basis by six percent year-over-year. Symantec’s Data Protection segment, which is comprised of Backup Exec, Net Backup and Enterprise Vault solutions, delivered 24 percent of total revenue and grew two percent on a combined non-GAAP basis year-over-year. Symantec’s consumer business represented 29 percent of total revenue and grew ten percent on a combined non-GAAP basis year-over-year. Services revenue, which is comprised of consulting and education, represented four percent of total revenue and grew 41 percent on a combined non-GAAP basis year-over-year.
International revenues represented 49 percent of non-GAAP revenue in the second quarter and grew 15 percent on a combined non-GAAP basis over the same quarter last year. The Americas, including the United States, Latin America, and Canada, represented 56 percent of total revenue and grew 3 percent on a combined non-GAAP basis year-over-year. The Europe, Middle East, and Africa region represented 30 percent of total revenue and grew 11 percent on a combined non-GAAP basis year-over-year. Asia Pacific/Japan represented 13 percent of total revenue and grew 25 percent on a combined non-GAAP basis year-over-year.
December Quarter Forecast
For the December 2005 quarter, GAAP revenue is estimated at $1.165 billion. This excludes $98 million of deferred revenue that was lost through the purchase accounting for the VERITAS transaction. Including this deferred revenue, Symantec’s non-GAAP revenue for the December 2005 quarter is estimated at $1.263 billion, six percent higher than the combined non-GAAP revenue from last December.
GAAP fully diluted earnings per share for the December quarter is estimated at $0.10. Non-GAAP fully diluted earnings per share, including $98 million of VERITAS deferred revenue that was eliminated as part of the purchase accounting, and excluding all merger-related costs, restructuring charges, and deferred compensation expenses, is forecasted at $0.25.
Fiscal Year 2006 Forecast
For the fiscal year ending March 2006, GAAP revenue is estimated at $4.2 billion. This excludes $288 million of deferred revenue that was lost through the purchase accounting for the VERITAS transaction and $559 million of revenue related to VERITAS for the quarter ended March 31, 2005. Including the $288 million of deferred revenue lost through the purchase accounting and including the $559 million of VERITAS March quarter revenue. Symantec’s combined Non-GAAP revenue for fiscal 2006 is estimated at $5 billion, 8 percent higher than the combined non-GAAP revenue for fiscal 2005 of $4.625 billion.
GAAP fully diluted earnings per share for the fiscal year ending in March 2006 is estimated at $0.19. Non-GAAP fully diluted earnings per share, including the net income effect of VERITAS deferred revenue that was eliminated during the
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Symantec Reports Second Quarter Earnings
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purchase accounting and including the VERITAS results for March 31, 2005 quarter, and excluding all merger-related costs, restructuring charges, and deferred compensation expenses, is estimated at $0.99.
Quarterly Highlights
    Symantec signed 843 contracts worldwide worth more than $100,000 each, including 67 deals worth more than $1 million each, during the quarter. Forty percent of these deals included multiple Symantec enterprise products and services.
 
    Symantec signed new or extended agreements with customers including the United States Air Force; Advanced Micro Devices, a leading provider of microprocessors, Flash memory devices, and silicon-based solutions for communications and computer companies worldwide; First American Corporation, one of the nation’s leading financial services organizations for business information; Constellation Energy, a FORTUNE 200 company and the nation’s largest competitive supplier of electricity to large commercial and industrial customers; Unisys, a global provider of information technology services; City of Chicago Business Information Services, a business improvement organization that assists city departments in redesigning business operations and leveraging technology to solve business issues; and Gwinnett County Public Schools, Georgia’s largest school system with over 140,000 students on 99 campuses in the metro Atlanta area.
 
    International customers from the quarter included: Toronto Catholic District School Board, a religious educational community of 95,000 students in 201 elementary and secondary schools located throughout Canada’s largest city; Coop Danmark A/S, the leading consumer goods retailer in Denmark, with approximately 64,000 employees and DKK100 billion (US $16 billion) in annual revenue; and Financiera Compartamos, an enterprise dedicated to providing financial services for small and micro business in Mexico.
Conference Call
Symantec has scheduled a conference call for 5 p.m. ET/2 p.m. PT today to discuss the results of the second quarter of fiscal year 2006, ended Sept. 30, 2005, and to review guidance for the fiscal year 2006. Interested parties may access the conference call on the Internet at http://www.symantec.com/invest/index.html. To listen to the live call, please go to the Web site at least 15 minutes early to register, download, and install any necessary audio software. A replay and script of our officers’ remarks will be available on the investor relations’ home page shortly after the call is completed.
About Symantec
Symantec is the world leader in providing solutions to help individuals and enterprises assure the security, availability, and integrity of their information. Headquartered in Cupertino, Calif., Symantec has operations in more than 40 countries. More information is available at www.symantec.com.
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Symantec Reports Second Quarter Earnings
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FORWARD LOOKING STATEMENTS: This press release contains statements regarding our financial and business results which may be considered forward-looking within the meaning of the U.S. federal securities laws, including statements relating to projections of future revenue and earnings per share. These statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from results expressed or implied in this press release. Such risk factors include those related to: the success of the VERITAS merger, including successful integration of VERITAS’ businesses, maintenance of customer and partner relationships and leveraging of synergies; the sustainability of recent growth rates, particularly in consumer products; the anticipation of the growth of certain market segments, particularly enterprise security and international; the competitive environment in the software industry; changes to operating systems and product strategy by vendors of operating systems; general market conditions; fluctuations in currency exchange rates; the timing and market acceptance of new product releases and upgrades; whether Symantec can successfully develop new products and integrate acquired businesses, and the degree to which these products and businesses gain market acceptance. Actual results may differ materially from those contained in the forward-looking statements in this press release. Additional information concerning these and other risk factors is contained in the Risk Factors section of Symantec’s Form 10-Q for the quarter ended July 1, 2005. Symantec assumes no obligation to update any forward-looking information contained in this press release.
USE OF NON-GAAP FINANCIAL INFORMATION: In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Symantec reports non-GAAP financial results. Non-GAAP net income and earnings per share exclude certain non-GAAP expenses, net of tax, and include VERITAS results of operations for the applicable periods, including adjustments based on the fair values of assets acquired and liabilities assumed as of the acquisition date of July 2, 2005 and deferred revenue that was eliminated as a result of purchase accounting for the VERITAS acquisition. Symantec’s management believes these non-GAAP measures are useful to investors because they provide supplemental information that facilitates comparisons to prior periods. Management uses these non-GAAP measures to evaluate its financial results, develop budgets and manage expenditures. The method Symantec uses to produce non-GAAP results is not computed according to GAAP, may differ from the methods used by other companies and should not be regarded as a replacement for corresponding GAAP measures. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results, which is attached to this release and can also be found on the investor relations page of Symantec’s Web site, along with additional pro forma financial information for the combined company, at www.symantec.com/invest/center.html.
###
NOTE TO EDITORS: If you would like additional information on Symantec Corporation and its products, please view the Symantec Press Center at http://www.symantec.com/PressCenter/ on Symantec’s Web site. All prices noted are in US dollars and are valid only in the United States.
Symantec, the Symantec logo, VERITAS, and the VERITAS logo are trademarks or registered trademarks of Symantec Corporation or its affiliates in the United States and certain other countries. Additional company and product names may be trademarks or registered trademarks of the individual companies and are respectfully acknowledged.

 


 

SYMANTEC CORPORATION
GAAP Consolidated Statements of Operations
(In thousands, except per share data)
                                 
    Three Months Ended     Six Months Ended  
    September 30,     September 30,  
    2005     2004     2005     2004  
 
         
(unaudited)
               
Net revenues
  $ 1,055,864     $ 618,313     $ 1,755,806     $ 1,174,947  
Cost of revenues:
                               
Cost of sales
    183,970       96,015       289,752       185,026  
Amortization of acquired product rights
    129,472       13,204       140,485       24,454  
 
                       
Cost of revenues
    313,442       109,219       430,237       209,480  
Gross profit
    742,422       509,094       1,325,569       965,467  
Operating expenses:
                               
Sales and marketing
    401,674       201,886       612,783       389,818  
Research and development
    187,313       83,816       278,546       156,700  
General and administrative
    59,379       27,578       89,767       51,863  
Amortization of other intangible assets from acquisitions
    48,309       1,142       50,048       2,034  
Amortization of deferred stock-based compensation(1)
    13,389       639       16,174       639  
Acquired in-process research and development
    284,000             284,000       2,262  
Restructuring
    1,452       1,916       4,926       2,776  
Integration planning
    5,253             13,154        
Patent settlement
                2,200        
 
                       
Total operating expenses
    1,000,769       316,977       1,351,598       606,092  
Operating income (loss)
    (258,347 )     192,117       (26,029 )     359,375  
Interest and other income, net
    39,963       10,723       62,721       21,161  
Interest expense
    (7,503 )     (5,291 )     (7,503 )     (10,582 )
 
                       
Income (loss) before income taxes
    (225,887 )     197,549       29,189       369,954  
Provision for income taxes
    25,441       61,926       81,884       117,054  
 
                       
Net income (loss)
  $ (251,328 )   $ 135,623     $ (52,695 )   $ 252,900  
 
                       
 
                       
Net income (loss) per share — diluted*
  $ (0.21 )   $ 0.19     $ (0.06 )   $ 0.35  
 
                       
 
                       
Shares used to compute net income (loss) per share — diluted*
    1,172,130       736,538       941,727       735,644  
 
                       
 
                       
 
(1)   Amortization of deferred stock-based compensation is allocated as follows:
                                 
Sales and marketing
  $ 4,457     $ 246     $ 5,263     $ 246  
Research and development
    6,763       337       7,868       337  
General and administrative
    2,169       56       3,043       56  
 
                       
 
  $ 13,389     $ 639     $ 16,174     $ 639  
 
                       
 
                       
*Share and per share amounts for the three and six months ended September 30, 2004 retroactively reflect the two-for-one stock split effected as a stock dividend, which occurred on November 19, 2004. For the three and six months ended September 30, 2004, diluted net income per share is calculated using the if-converted method. Under this method, the numerator excludes the interest expense from the 3% convertible subordinated notes, net of income tax, of $3.6M and $7.2M for the three and six months ended September 30, 2004, respectively, and the denominator includes shares issuable from the assumed conversion of the 3% convertible subordinated notes.


 

SYMANTEC CORPORATION
Consolidated Balance Sheets
(In thousands, except per share data)
                 
    September 30,     March 31,  
    2005     2005  
 
 
(Unaudited)
       
ASSETS
               
Current assets:
               
Cash and short-term investments
  $ 4,433,332     $ 3,206,587  
Trade accounts receivable, net
    444,120       285,325  
Inventories
    14,024       19,118  
Current deferred income taxes
    146,305       97,279  
Other current assets
    196,160       79,973  
 
           
Total current assets
    5,233,941       3,688,282  
Property and equipment, net
    863,216       382,689  
Acquired product rights, net
    1,294,374       127,619  
Other intangible assets, net
    1,496,517       30,739  
Goodwill
    9,933,776       1,365,213  
Other long-term assets
    45,588       19,679  
 
           
 
  $ 18,867,412     $ 5,614,221  
 
           
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Convertible subordinated notes
  $ 502,000     $  
Accounts payable
    162,688       74,685  
Accrued compensation and benefits
    248,331       140,543  
Current deferred revenue
    1,379,403       1,215,537  
Other accrued expenses
    321,161       91,033  
Income taxes payable
    283,031       179,225  
 
           
Total current liabilities
    2,896,614       1,701,023  
Long-term deferred revenue
    132,606       114,724  
Long-term deferred tax liabilities
    708,910       88,613  
Other long-term obligations
    40,867       4,408  
Stockholders’ equity:
               
Common stock
    11,171       7,105  
Capital in excess of par value
    13,967,035       2,412,947  
Accumulated other comprehensive income
    160,364       191,938  
Deferred stock-based compensation
    (62,312 )     (21,070 )
Retained earnings
    1,012,157       1,114,533  
 
           
Total stockholders’ equity
    15,088,415       3,705,453  
 
           
 
  $ 18,867,412     $ 5,614,221  
 
           
 
           


 

SYMANTEC CORPORATION
Reconciliation of Consolidated Statements of Operations to Non-GAAP Statements of Operations
(In thousands, except per share data)
(Unaudited)
                                                                                     
    Three Months Ended September 30, 2005     Three Months Ended September 30, 2004          
    GAAP     Non-GAAP                     GAAP                     Non-GAAP                  
    Symantec*     Adjustments             Non-GAAP     Symantec*     VERITAS**             Adjustments             Non-GAAP    
                     
Financial Statement Information
                                                                                 
Net revenues (1)
  $ 1,055,864     $ 136,280       A     $ 1,192,144     $ 618,313     $ 485,034       H     $             $ 1,103,347    
Cost of revenues:
                                                                                 
Cost of sales (1)
    183,970                       183,970       96,015       75,690       H       (901 )     D       171,789    
 
                                            (66 )     J                            
 
                                            901       K                            
 
                                            (52 )     L                            
 
                                            202       M                            
Amortization of acquired product rights (1)
    129,472       (129,472 )     B             13,204       4,055       H       (85,355 )     B          
 
                                            (4,055 )     I                                  
 
                                            72,151       N                            
                     
Total cost of revenue (2)
    313,442       (129,472 )             183,970       109,219       148,826               (86,256 )             171,789    
Gross profit (2)
    742,422       265,752               1,008,174       509,094       336,208               86,256               931,558    
Operating expenses:
                                                                                 
Sales and marketing (1)
    401,674       (770 )     C       400,904       201,886       151,580       H                       352,833    
 
                                            (981 )     J                            
 
                                            (28 )     L                            
 
                                            376       M                            
Research and development (1)
    187,313       (757 )     C       186,556       83,816       83,580       H                       166,963    
 
                                            (614 )     J                            
 
                                            (58 )     L                            
 
                                            239       M                            
General and administrative (1)
    59,379       (1,525 )     C       57,854       27,578       46,389       H                       73,536    
 
                                            (24 )     J                            
 
                                            (540 )     L                            
 
                                            133       M                            
Amortization of other intangibles from acquisitions (1)
    48,309       (48,309 )     B             1,142       2,409       H       (47,906 )     B          
 
                                            (2,409 )     I                            
 
                                            46,764       N                            
Amortization of deferred stock-based compensation (1)
    13,389       (13,389 )     D             639       4,733       K       (5,372 )     D          
Acquired in-process research and development (1)
    284,000       (284,000 )     B                                                        
Restructuring (1)
    1,452       (1,452 )     E             1,916                       (1,916 )     E          
Integration planning (1)
    5,253       (5,253 )     F                                                      
                     
Total operating expenses (2)
    1,000,769       (355,455 )             645,314       316,977       331,549               (55,194 )             593,332    
                     
Operating income (loss) (2)
    (258,347 )     621,207               362,860       192,117       4,659               141,450               338,226    
Interest and other income, net (1)
    39,963                       39,963       10,723       10,438       H                       21,161    
Interest expense (1)
    (7,503 )                     (7,503 )     (5,291 )     (6,000 )     H                       (13,802 )  
 
                                            (2,511 )     O                            
                     
Income (loss) before income taxes (2)
    (225,887 )     621,207               395,320       197,549       6,586               141,450               345,585    
Provision for income taxes (1)
    25,441       97,107       G       122,548       61,926       39,299       H       37,434       G       110,587    
 
                                            (28,072 )     G                            
                     
Net income (loss) (2)
  $ (251,328 )   $ 524,100             $ 272,772     $ 135,623     $ (4,641 )           $ 104,016             $ 234,998    
                     
Net income(loss) per share:
                                                                                 
Diluted (2)***
  $ (0.21 )                   $ 0.23     $ 0.19                                     $ 0.19    
Shares used to compute net income (loss) per share:
                                                                                 
Diluted (1)***
    1,172,130                       1,205,052       736,538                                     1,233,840   P
 
    NOTES:
 
    The above information reflects the combined results of Symantec Corporation (“Symantec”) and VERITAS Software Corporation (“VERITAS”), including amounts related to the amortization of fair value adjustments of assets acquired and liabilities assumed by Symantec as of the actual acquisition date of July 2, 2005. For comparative purposes, the information presented assumes that the acquisition took place on April 1, 2004. If the acquisition had taken place on April 1, 2004, the fair values of the assets and liabilities would have been different and actual results of operations would have been different from those presented above.
 
    Additional non-GAAP adjustments consist of: non-cash charges related to acquisitions, such as the amortization of intangibles and stock-based compensation expense, and the write-off of in-process research and development; restructuring charges; integration planning costs; and the impact of other special items, such as other stock-based compensation expense, litigation matters, gain/loss on investments and related adjustments to provision for income taxes on our operating results. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
 
    (*) The results of operations include our results for the three months ended September 30, 2005 and 2004 and VERITAS beginning from July 2, 2005
 
    (**) The results of operations include VERITAS’ historical results for the three months ended June 30, 2004, including amortization related to fair value adjustments based on the fair values of assets acquired and liabilities assumed as of the acquisition date of July 2, 2005.
 
    (***) Share and per share amounts for the three and six months ended September 30, 2004 retroactively reflect the two-for-one stock split effected as a stock dividend, which occurred on November 19, 2004. For the three and six months ended September 30, 2004, diluted net income per share is calculated using the if-converted method. Under this method, the numerator excludes the interest expense from the 3% convertible subordinated notes, net of income tax, of $3.6M and $7.2M for the three and six months ended September 30, 2004, respectively, and the denominator includes shares issuable from the assumed conversion of the 3% convertible subordinated notes.
             
 
    Footnotes:      
 
    1     Symantec includes these non-GAAP financial measures because we believe these measures are useful to investors in that they allow for greater transparency to certain line items in our financial statements. We have historically reported similar non-GAAP financial measures to our investors and believe that the inclusion of comparative numbers provides consistency in our financial reporting. Investors are encouraged to review the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures as provided herein.
 
 
    2     Symantec’s management refers to these non-GAAP financial measures, such as non-GAAP operating margins and net income, in making operating decisions because the measures provide meaningful supplemental information regarding our operational performance and our ability to invest in research and development and fund acquisitions and capital expenditures. In addition, these non-GAAP financial measures facilitate management’s internal comparisons to our historical operating results and comparisons to competitors’ operating results. Investors are encouraged to review the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures as provided herein.
 
 
    A     To include VERITAS’ deferred revenue that was excluded as a result of adjustments to fair value.
 
    B     To exclude non-cash charges of amortization of acquired product rights, amortization of other intangible assets and the write-off of acquired in-process research and development.
 
    C     To exclude executive incentive bonuses related to the VERITAS acquisition.
 
    D     To exclude amortization of deferred stock-based compensation.
 
    E     To exclude charges relating to restructuring.
 
    F     To exclude the Symantec and VERITAS integration planning costs.
 
    G     To adjust the provision for income taxes to reflect the effect of the Non-GAAP adjustments on net income (loss).
 
    H     To include VERITAS’ historical results of operations for the three months ended June 30, 2004.
 
    I     To eliminate VERITAS’ historical amortization of developed technology and other intangible assets.
 
    J     To eliminate VERITAS’ historical amortization of deferred stock-based compensation.
 
    K     To amortize deferred stock-based compensation related to the VERITAS acquisition.
 
    L     To amortize VERITAS’ lease obligation in excess of fair value.
 
    M     To record additional depreciation expense on VERITAS’ property and equipment as a result of the adjustment to fair value.
 
    N     To amortize acquired product rights and other intangible assets related to the VERITAS acquisition.
 
    O     To amortize the discount on VERITAS’ convertible subordinated debt as a result of adjustment to fair value.
 
    P   Diluted shares are equal to Symantec historical shares plus VERITAS historical shares multiplied by the exchange ratio of 1.1242.


 

SYMANTEC CORPORATION
Reconciliation of Consolidated Statements of Operations to Non-GAAP Statements of Operations
(In thousands, except per share data)
(Unaudited)
                                                                                                   
    Six Months Ended September 30, 2005   Six Months Ended September 30, 2004  
    GAAP                     Non-GAAP                     GAAP                     Non-GAAP                  
    Symantec*     VERITAS**             Adjustments             Non-GAAP     Symantec*     VERITAS***             Adjustments             Non-GAAP    
Financial Statement Information
                                                                                                 
Net revenues (1)
  $ 1,755,806     $ 559,258   A         $ 136,280   J         $ 2,451,344     $ 1,174,947     $ 970,781   A                         $ 2,145,728    
Cost of revenues:
                                                                                                 
Cost of sales (1)
    289,752       87,657   A           (901 ) K           376,157       185,026       151,052   A           (1,802 ) K           336,080    
 
            (401 ) B                                           (303 ) B                                
 
            901   C           (1,057 ) L                           1,802   C                                
 
            (52 ) D                                           (104 ) D                                
 
            258   E                                           409   E                                
Amortization of acquired product rights (1)
    140,485       7,424   A           (212,636 ) M                 24,454       7,879   A           (214,656 ) M              
 
            (7,424 ) F                                           (7,879 ) F                                
 
            72,151   G                                           190,202   G                                
           
Total cost of revenue (2)
    430,237       160,514               (214,594 )             376,157       209,480       343,058               (216,458 )             336,080    
Gross profit (2)
    1,325,569       398,744               350,874               2,075,187       965,467       627,723               216,458               1,809,648    
Operating expenses:
                                                                                                 
Sales and marketing (1)
    612,783       165,652   A           (3,094 ) L           773,607       389,818       294,618   A                           681,261    
 
            (1,396 ) B           (770 ) N                           (3,862 ) B                                
 
            (28 ) D                                           (56 ) D                                
 
            460   E                                           743   E                                
Research and development (1)
    278,546       97,510   A           (2,700 ) L           371,512       156,700       163,504   A                           318,727    
 
            (1,331 ) B           (757 ) N                           (1,836 ) B                                
 
            (58 ) D                                           (116 ) D                                
 
            302   E                                           475   E                                
General and administrative (1)
    89,767       87,907   A           (1,525 ) N           140,981       51,863       94,138   A                           144,426    
 
            (60 ) B           (30,000 ) O                           (768 ) B                                
 
            (540 ) D           (4,826 ) L                           (1,080 ) D                                
 
            258   E                                           273   E                                
Amortization of other intangibles from acquisitions (1)
    50,048       2,430   A           (96,812 ) M                 2,034       4,803   A           (95,562 ) M              
 
            (2,430 ) F                                           (4,803 ) F                                
 
            46,764   G                                           93,528   G                                
Amortization of deferred stock-based compensation (1)
    16,174       4,733   C           (20,907 ) P                 639       9,466   C           (10,105 ) P              
Acquired in-process research and development (1)
    284,000                       (284,000 ) M                 2,262       400   A           (2,262 ) M              
 
                                                            (400 ) F                                
Restructuring (1)
    4,926                       (4,926 ) Q                 2,776                       (2,776 ) Q              
Integration planning (1)
    13,154                       (13,154 ) L                                                          
Patent settlement (1)
    2,200                       (2,200 ) R                                                          
           
Total operating expenses
    1,351,598       400,173               (465,671 )             1,286,100       606,092       649,027               (110,705 )             1,144,414    
           
Operating income (loss) (2)
    (26,029 )     (1,429 )             816,545               789,087       359,375       (21,304 )             327,163               665,234    
Interest and other income, net (1)
    62,721       15,532   A                           78,253       21,161       21,764   A                           42,925    
Interest expense (1)
    (7,503 )     (5,198 ) A                           (15,212 )     (10,582 )     (11,702 ) A                           (27,306 )  
 
            (2,511 ) H                                           (5,022 ) H                                
Gain on strategic investments (1)
          732   A           (732 ) S                       7,496   A           (7,496 ) S              
           
Income (loss) before income taxes (2)
    29,189       7,126               815,813               852,128       369,954       (8,768 )             319,667               680,853    
Provision for income taxes (1)
    81,884       47,042   A           166,225   I           268,727       117,054       85,427   A           79,608   I           217,873    
 
            (26,424 ) I                                           (64,216 ) I                                
           
Net income (loss) (2)
  $ (52,695 )   $ (13,492 )           $ 649,588             $ 583,401     $ 252,900     $ (29,979 )           $ 240,059             $ 462,980    
           
Net income(loss) per share:
                                                                                                 
Diluted (2) ****
  $ (0.06 )                                   $ 0.60     $ 0.35                                     $ 0.38    
Shares used to compute net income (loss) per share:
                                                                                                 
Diluted (1) ****
    941,727                                       971,042       735,644                                     1,234,364   T
 
    The above information reflects the combined results of Symantec Corporation (“Symantec”) and VERITAS Software Corporation (“VERITAS”), including amounts related to the amortization of fair value adjustments of assets acquired and liabilities assumed by Symantec as of the actual acquisition date of July 2, 2005. For comparative purposes, the information presented assumes that the acquisition took place on April 1, 2004. If the acquisition had taken place on April 1, 2004, the fair values of the assets and liabilities would have been different and actual results of operations would have been different from those presented above.
 
    Additional non-GAAP adjustments consist of: non-cash charges related to acquisitions, such as the amortization of intangibles and stock-based compensation expense, and the write-off of in-process research and development; restructuring charges; integration planning costs; and the impact of other special items, such as other stock-based compensation expense, litigation matters, gain/loss on investments and related adjustments to provision for income taxes on our operating results. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
 
    (*) The results of operations include our results for the six months ended September 30, 2005 and 2004 and VERITAS beginning from July 2, 2005
 
    (**) The results of operations include VERITAS’ historical results for the three months ended March 31, 2005, including amortization related to fair value adjustments based on the fair values of assets acquired and liabilities assumed as of the acquisition date of July 2, 2005.
 
    (***) The results of operations include VERITAS’ historical results for the six months ended June 30, 2004, including amortization related to fair value adjustments based on the fair values of assets acquired and liabilities assumed as of the acquisition date of July 2, 2005.
 
    (****) Share and per share amounts for the three and six months ended September 30, 2004 retroactively reflect the two-for-one stock split effected as a stock dividend, which occurred on November 19, 2004. For the three and six months ended September 30, 2004, diluted net income per share is calculated using the if-converted method. Under this method, the numerator excludes the interest expense from the 3% convertible subordinated notes, net of income tax, of $3.6M and $7.2M for the three and six months ended September 30, 2004, respectively, and the denominator includes shares issuable from the assumed conversion of the 3% convertible subordinated notes.
             
 
    Footnotes:      
 
    1.     Symantec includes these non-GAAP financial measures because we believe these measures are useful to investors in that they allow for greater transparency to certain line items in our financial statements. We have historically reported similar non-GAAP financial measures to our investors and believe that the inclusion of comparative numbers provides consistency in our financial reporting. Investors are encouraged to review the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures as provided herein.
 
 
    2.     Symantec’s management refers to these non-GAAP financial measures, such as non-GAAP operating margins and net income, in making operating decisions because the measures provide meaningful supplemental information regarding our operational performance and our ability to invest in research and development and fund acquisitions and capital expenditures. In addition, these non-GAAP financial measures facilitate management’s internal comparisons to our historical operating results and comparisons to competitors’ operating results. Investors are encouraged to review the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures as provided herein.
 
 
    A     To include VERITAS’ historical results of operations for applicable periods
 
    B     To eliminate VERITAS’ historical amortization of deferred stock-based compensation.
 
    C     To amortize deferred stock-based compensation related to the VERITAS acquisition.
 
    D     To amortize VERITAS’ lease obligation in excess of fair value.
 
    E     To record additional depreciation expense on VERITAS’ property and equipment as a result of the adjustment to fair value.
 
    F     To eliminate VERITAS’ historical amortization of developed technology, other intangible assets and the write-off of in-process research and development.
 
    G     To amortize acquired product rights and other intangible assets related to the VERITAS acquisition.
 
    H     To amortize the discount on VERITAS’ convertible subordinated debt as a result of adjustment to fair value.
 
    I     To adjust the provision for income taxes to reflect the effect of the non-GAAP adjustments on net income (loss).
 
    J     To include VERITAS’ deferred revenue that was excluded as a result of adjustments to fair value
 
    K     To exclude amortization of deferred stock-based compensation.
 
    L     To exclude the Symantec and VERITAS integration planning costs.
 
    M     To exclude non-cash charges of amortization of acquired product rights, amortization of other intangible assets and the write-off of acquired in-process research and development.
 
    N     To exclude executive incentive bonuses related to the VERITAS acquisition.
 
    O     To exclude $30 million related to the proposed VERITAS settlement with the SEC.
 
    P   To exclude amortization of deferred stock-based compensation.
 
    Q     To exclude charges relating to restructuring.
 
    R     To exclude patent settlement costs
 
    S     To exclude gains/losses on strategic investments.
 
    T     Diluted shares are equal to Symantec historical shares plus VERITAS historical shares multiplied by the exchange ratio of 1.1242.