Symantec 2001 Annual Report Download - page 27

Income Taxes Our effective tax rate on income before one-time
charges (acquired in-process research and development, restructuring
and other expenses), goodwill amortization expense and gain on sale
of product lines was 32% for fiscal 2001, 2000, and 1999. Our fiscal
2001, 2000, and 1999 effective rates were lower than the U.S. federal
and state combined statutory rate primarily due to a lower statutory
tax rate on our Irish operations.
Our effective tax rate on income was 55%, 34% and 40% for fiscal
2001, 2000 and 1999, respectively. The higher effective tax rate in fiscal
2001 reflects the non-deductibility of acquired in-process research and
development and substantially all of the goodwill amortization. The
higher effective tax rate in 1999 reflects the non-deductibility of
acquired in-process research and development. In addition, for fiscal
2000, tax was provided on the gain on sale of product lines at an effec-
tive tax rate of 34%. This rate is lower than the U.S. federal and state
combined statutory rate because a portion of the gain is attributable to
our Irish operations and accordingly subject to a lower Irish tax rate.
Realization of a significant portion of the $80 million of net deferred
tax assets is dependent on our ability to generate future U.S. taxable
income of approximately $145 million.
We believe that it is more likely than not that the $80 million of
deferred tax assets will be realized based on historical earnings and
expected levels of future U.S. taxable income. Additional valuation
allowance against net deferred tax assets may be necessary if it is more
likely than not that all or a portion of the net deferred tax assets will
not be realized. We will assess the need for additional valuation
allowance on a quarterly basis.
We project our effective tax rate on income before goodwill amortiza-
tion to be 32% in fiscal 2002. This projection, however, is subject to
change due to potential tax law changes and fluctuations in the geo-
graphic allocation of earnings.
Liquidity and Capital Resources Cash, cash equivalents and short-
term investments increased approximately $125 million to $557
million at the end of fiscal 2001 from $432 million at the end of fiscal
2000. This increase was largely due to cash provided from operations,
including royalty income from Interact, net proceeds from the exercise
of stock options under our stock option plans, sales of common stock
through our employee stock purchase plan, and acquired AXENT cash
balances. The cash provided by these factors was partially offset by cash
paid to repurchase common stock, for capital expenditures, and for
marketable securities and investments.
In addition to cash and short-term investments, we have $75 million of
restricted investments related to collateral requirements under certain
lease agreements. We are obligated under these lease agreements for
two office buildings in Cupertino, California to maintain a restricted
cash balance invested in U.S. Treasury securities with maturities not to
exceed three years. In accordance with the lease terms, these funds are
not available to meet our operating cash requirements. This lease is
classified as an operating lease. We were in compliance with our
covenants on these lease agreements as of March 31, 2001. Future
acquisitions or other events could cause us to be in violation of these
covenants.
On March 30, 2001, we entered into a master lease agreement for
land and the construction of two office buildings in Newport News,
Virginia, effective June 6, 2001, and Eugene, Oregon, effective April 6,
2001. We are obligated under the lease agreement to maintain a
restricted cash balance invested in U.S. Treasury securities with maturi-
ties not to exceed two years, during the construction period, or in
certificates of deposit issued by certain lenders, after the construction
period. In accordance with the lease terms, these funds are not avail-
able to meet our operating cash requirements. As of March 31, 2001,
we had no restricted funds associated with these facilities. This lease is
classified as an operating lease. In addition, we are obligated to comply
with certain financial covenants. Future acquisitions or other events
could cause us to be in violation of these financial covenants.
As of March 31, 2001, we also had a $10 million line of credit that
expired May 2001. We were in compliance with the debt covenants for
this line of credit as of March 31, 2001. There were no borrowings and
less than $1 million of standby letters of credit outstanding under this
line as of March 31, 2001. Although we did not renew this line of
credit, we believe that there will not be a material adverse impact on
our financial results, liquidity or capital resources.
Net cash provided by operating activities was approximately $325
million and was comprised of net income of approximately $64 million,
non-cash related expenses of $149 million and a net increase of
$112 million in liabilities, net of an increase in assets.
Net trade accounts receivable increased $70 million to approximately
$117 million at March 31, 2001 from approximately $47 million at
March 31, 2000. The increase in accounts receivable was primarily
due to the acquisition of AXENT’s accounts receivable balances and
increases in our Enterprise Security and international sales.
Net cash provided by investing activities was approximately $24
million and was comprised primarily of $60 million in net proceeds
from sales of marketable securities and investments and $37 million
in acquired AXENT cash balances, offset by $73 million of capital
expenditures and other investing activities.
On March 22, 1999, the Board authorized the repurchase of up to
$75 million of our outstanding common stock. On January 16, 2001,
the Board replaced this authorization with a new authorization to
repurchase up to $700 million, not to exceed 15 million shares, of
Symantec common stock with no expiration date. During fiscal 2001,
we repurchased 5.0 million shares at prices ranging from $46.07 to
$51.16, for an aggregate amount of approximately $244 million.
We believe that existing cash and short-term investments and cash
generated from operating results will be sufficient to fund operations
for the next year.
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