Symantec 1999 Annual Report Download - page 77

SYMANTEC CORPORATION
Notes to Consolidated Financial Statements, Continued
63
In fiscal 1997, we entered into lease agreements for two existing office buildings, City Center One (CC1) and World
Headquarters (WHQ), land and one office building under construction in Cupertino, California, City Center Five
(CC5). In fiscal 1999, the landlord exchanged CC5 for another building, City Center Two (CC2) in Cupertino,
California and committed to sell WHQ. Once the appropriate leasehold improvements are made to CC2, we will
vacate WHQ and move into CC2 and be relieved of the lease liability associated with WHQ. Lease payments are
based on the three-month LIBOR in effect at the beginning of each fiscal quarter. Symantec has the right to acquire
the related properties at any time during the seven-year lease period. If, at the end of the lease term we do not renew
the lease, purchase the property under lease or arrange a third party purchase, then we will be obligated to the lessor
for a guaranteed residual amount equal to a specified percentage of the lessor’s purchase price of the property. We
would also be obligated to the lessor for all or some portion of this amount if the price paid by the third party is below
the guaranteed residual amount. The guaranteed residual payment on the lease agreements for the two existing office
buildings totals approximately $42 million. The guaranteed residual payment on the lease agreements for CC2 and
the associated leaseholds under construction was approximately $28 million at March 31, 1999. As security against
these guaranteed residual payments, we are required to maintain a corresponding investment in U.S. Treasury
securities with maturities not to exceed three years. Symantec is restricted in its use of these investments per the terms
of the lease agreement. At March 31, 1999, the investments total approximately $71 million and are classified as non-
current restricted investments within the financial statements.
We currently occupy a portion of these office buildings and have assumed the right to sub-lease income provided by
the other tenants. The sub-lease agreements have terms expiring in August 1999 through February 2001.
NOTE 10. INCOME TAXES
The components of the provision for income taxes were as follows:
Year Ended March 31,
(In thousands) 1999 1998 1997
Current:
Federal $11,649 $13,615 $ 514
State 5,335 4,879 302
International 22,226 15,368 3,472
39,210 33,862 4,288
Deferred:
Federal (1,949) (5,788) 565
State (597) (2,247) 126
International (3,692) 1,181 (639)
(6,238) (6,854) 52
$ 32,972 $ 27,008 $ 4,340
The difference between Symantec’s effective income tax rate and the federal statutory income tax rate as a percentage
of income before income taxes was as follows:
Year Ended March 31,
1999 1998 1997
Federal statutory rate 35.0% 35.0% 35.0%
State taxes, net of federal benefit 3.5 1.5 2.9
Acquired in-process research and development charges
with no current tax benefit 7.1 -- --
Impact of international operations (3.9) (4.0) (9.2)
Benefit of pre-acquisition losses of acquired entities -- (10.1) (16.5)
Other, net (2.1) 1.7 2.1
39.6% 24.1% 14.3%