Symantec 2001 Annual Report Download - page 47

The difference between our 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
2001 2000 1999
Federal statutory rate 35.0 % 35.0 % 35.0 %
State taxes, net of federal benefit 4.3 3.0 3.5
Acquired in-process research
and development charges
with no tax benefit 5.5 —7.1
Non-deductible goodwill
amortization 16.8 2.1 —
Foreign earnings taxed at less
than the federal rate (11.5) (5.6) (3.9)
Valuation allowance for
potential non-deductible
loss on investment 3.1 ——
Other, net 1.4 (0.6) (2.1)
54.6 % 33.9 % 39.6 %
The principal components of deferred tax assets were as follows:
March 31
(In thousands) 2001 2000
Deferred tax assets:
Tax credit carryforwards $ 6,222 $ 3,891
Net operating loss carryforwards
of acquired companies 27,267 18,949
Inventory valuation accounts 1,461 1,756
Other reserves and accruals not
currently tax deductible 12,221 6,749
Accrued compensation and benefits 7,799 3,751
Deferred revenue 7,394 4,864
Sales incentive programs 2,803 5,768
Reserve for returns and allowances 7,924 15,806
Bad debt reserves not currently
tax deductible 2,220 1,735
Loss on investments not currently
tax deductible 10,199 2,224
Intercompany profit elimination 10,808 —
Book over tax depreciation 9,075 7,008
Other 6,075 6,515
111,468 79,016
Valuation allowance (5,111) —
Deferred tax assets 106,357 79,016
Deferred tax liability:
Acquired intangible assets (24,229) —
Unremmited earnings of foreign
subsidiaries (1,802) —
Net deferred tax assets $ 80,326 $ 79,016
Realization of a significant portion of the $80 million of net deferred
tax assets is dependent upon our ability to generate sufficient future
U.S. taxable income. We believe that it is more likely than not that the
asset will be realized based on historical and forecasted U.S. earnings.
The change in the valuation allowance for fiscal 2001 and 2000 was a
net increase of approximately $5 million and a net decrease of approxi-
mately $30 million, respectively. The net increase in the valuation
allowance during fiscal 2001 is attributable to a write-down of an
equity investment, the loss of which may not be deductible for tax pur-
poses. Of the $30 million decrease in the valuation allowance during
fiscal 2000, approximately $21 million was attributable to previously
unbenefitted stock option deductions, the benefit of which was cred-
ited to stockholders’equity.
In connection with the acquisition of AXENT, a $19 million net
deferred tax liability was established. This amount represents a $35
million deferred tax liability set up on certain acquired intangibles,
net of a $16 million deferred tax asset set up for the tax carryforward
attributes of AXENT. The offsetting adjustment was to increase goodwill.
As of March 31, 2001, we have tax credit carryforwards of approxi-
mately $6 million that expire in fiscal 2004 through 2006. In addition,
we have net operating loss carryforwards attributable to Quarterdeck
of approximately $43 million that expire in fiscal 2011 through 2019.
We also have net operating loss carryforwards attributable to AXENT
of approximately $24 million that expire in fiscal 2007 through 2020.
Because of the “change in ownership”provisions of the Internal
Revenue Code of 1986, the net operating loss carryforwards of
Quarterdeck and AXENT are subject to an annual limitation of
approximately $2.4 million and $10 million, respectively, regarding
their utilization against taxable income in future periods.
Pretax income from international operations was approximately $145
million, $117 million and $64 million for fiscal 2001, 2000 and 1999,
respectively.
No provision has been made for federal or state income taxes on
$280 million of cumulative unremitted earnings of certain of our
foreign subsidiaries as of March 31, 2001, since we plan to indefinitely
reinvest these earnings. At March 31, 2001, the unrecognized deferred
tax liability for these earnings was approximately $73 million.
Note 10. Employee Benefits
401(k) Plan We maintain a salary deferral 401(k) plan for all of our
domestic employees. This plan allows employees to contribute up to
20% of their pretax salary up to the maximum dollar limitation pre-
scribed by the Internal Revenue Code. We match 100% of the first
$500 of employees’contributions and then 50% of the employees’con-
tribution. The maximum employer match in any given plan year is 3%
of the employees’eligible compensation. Our contributions under the
plan were approximately $3 million for the year ended March 31, 2001
and $2 million for each of the years ended March 31, 2000 and 1999.
Employee Stock Purchase Plans In October 1989, we established the
1989 Employee Stock Purchase Plan (“89 Purchase Plan”). Since incep-
tion, we have reserved a total of approximately 3.4 million shares of
common stock for issuance under this plan. Subject to certain limita-
tions, our employees may purchase, through payroll deductions of 2%
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