Dell 1998 Annual Report Download - page 30

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U.S. federal statutory rate............................. 35.0% 35.0% 35.0%
Foreign income taxed at different rates................. (7.0)% (4.6)% (6.2)%
Other................................................... 2.0% 0.6% 0.2%
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Effective tax rates..................................... 30.0% 31.0% 29.0%
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NOTE 4 -- FINANCING ARRANGEMENTS
The Company maintains a $250 million revolving credit facility, which expires in
June 2002. At February 1, 1998, the Company had a $150 million receivables
securitization facility. The receivables securitization facility was cancelled
during fiscal year 1999. Commitment fees for both facilities are payable
quarterly and are based on specific liquidity requirements. Commitment fees paid
in fiscal years 1999, 1998 and 1997 were not material to the Company. At January
29, 1999 and February 1, 1998, these facilities were unused.
NOTE 5 -- PREFERRED STOCK
Authorized Shares -- The Company has the authority to issue five million shares
of preferred stock, par value $.01 per share. At January 29, 1999 and February
1, 1998, no shares of preferred stock were issued or outstanding.
Series A Junior Participating Preferred Stock -- In conjunction with the
distribution of Preferred Share Purchase Rights (see Note 8 -- Preferred Share
Purchase Rights), the Company's Board of Directors designated 200,000 shares of
preferred stock as Series A Junior Participating Preferred Stock ("Junior
Preferred Stock") and reserved such shares for issuance upon exercise of the
Preferred Share Purchase Rights. At January 29, 1999 and February 1, 1998, no
shares of Junior Preferred Stock were issued or outstanding.
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NOTE 6 -- COMMON STOCK
Authorized Shares -- On July 17, 1998, the Company's stockholders approved an
amendment to the Company's Certificate of Incorporation to increase the number
of shares of common stock, par value $.01 per share, that the Company is
authorized to issue from one billion to three billion.
Stock Splits -- On each of March 6, 1998, September 4, 1998 and March 5, 1999,
the Company effected a two-for-one common stock split by paying a 100% stock
dividend to stockholders of record as of February 27, 1998, August 28, 1998 and
February 26, 1999, respectively. All share and per share information included in
the accompanying consolidated financial statements and related notes have been
restated to reflect these stock splits.
Stock Repurchase Program -- The Board of Directors has authorized the Company to
repurchase up to one billion shares of its common stock in open market or
private transactions. During fiscal years 1999 and 1998, the Company repurchased
149 million and 278 million shares of its common stock, respectively, for an
aggregate cost of $1.5 billion and $1.0 billion, respectively. The Company
utilizes equity instrument contracts to facilitate its repurchase of common
stock. At January 29, 1999 and February 1, 1998, the Company held equity
instrument contracts that relate to the purchase of 49 million and 200 million
shares of common stock, respectively, at an average cost of $14 and $11 per
share, respectively. Additionally, at January 29, 1999 and February 1, 1998, the
Company had outstanding put obligations covering 33 million and 218 million
shares, respectively, at an average exercise price of $11 and $10, respectively.
The equity instruments are exercisable only at date of expiration, with the
expiration dates ranging from the first quarter of fiscal year 2000 through the
fourth quarter of fiscal year 2000. The outstanding put obligations at January
29, 1999 and February 1, 1998 permitted net-share settlement at the Company's
option and, therefore, did not result in a put obligation liability on the
accompanying consolidated statement of financial position. The equity
instruments did not have a material effect on diluted earnings per common share
for fiscal years 1999 and 1998.
NOTE 7 -- BENEFIT PLANS
Incentive and Employee Stock Purchase Plans -- The Dell Computer Corporation
Incentive Plan (the "Incentive Plan"), which is administered by the Compensation
Committee of the Board of Directors, provides for the granting of incentive
awards in the form of stock options, stock appreciation rights ("SARs"),
restricted stock, stock and cash to directors, executive officers and key
employees of the Company and its subsidiaries, and certain other persons who
provide consulting or advisory services to the Company.
Options granted may be either incentive stock options within the meaning of
Section 422 of the Internal Revenue Code or nonqualified options. The right to
purchase shares under the existing stock option agreements typically vest
pro-rata at each option anniversary date over a five-year period. Stock options
must be exercised within 10 years from date of grant. Stock options are