Avid 1997 Annual Report Download - page 40

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Deferred tax assets are comprised of the following (in thousands): December 31,
1997 1996
Allowances for accounts receivable $1,583 $1,406
Difference in accounting for:
Revenue 3,922 2,440
Costs and expenses 9,372 6,764
Inventories 2,738 4,650
Purchased technology 43 324
Deferred intercompany profit 23 589
Tax credit and net operating loss carryforwards 14,820 15,538
Other (521) (321)
Net deferred tax assets $31,980 $31,390
For U.S. Federal Income Tax purposes at December 31, 1997, the Company has tax credit carryforwards of approximately
$7,291,000 which will expire between 1998 and 2012 and a net operating loss carryforward of approximately $18,105,000
which will expire in 2011. Deferred tax assets reflect the net tax effects of the tax credits and operating loss carryforwards
and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Although realization is not assured, management believes it is more likely than not
that all of the deferred tax assets will be realized; accordingly, no valuation allowance has been recorded for net deferred tax
assets. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of
future taxable income are reduced.
A reconciliation of the Company's income tax provision (benefit) to the statutory federal tax rate follows:
1997 1996 1995
Statutory rate 35% (35%) 35%
Nondeductible merger costs 6
Tax credits (4) (1) (3)
Foreign operations (3) 4 (2)
State taxes, net of federal benefit 2 (2) 2
Municipal bond interest (2)
Foreign sales corporation (1) (1)
Other 2 2 1
31% (32%) 36%
Consolidated results of operations include results of manufacturing operations in Ireland. Income from the sale of products
manufactured or developed in Ireland is subject to a 10% Irish tax rate through the year 2010. The favorable Irish tax rate
resulted in tax benefits of approximately $900,000 in 1997 and $1,300,000 in 1995. The 1996 Irish tax benefit was
immaterial to the results of operations. The 1997 basic and dilutive per share tax benefit was $0.04 and $0.04, respectively.
The 1995 basic and dilutive per share tax benefit was $0.07 and $0.06, respectively.
I. Capital Stock
Preferred Stock
The Company is authorized to issue up to one million shares of Preferred Stock, $.01 par value per share. Each such series
of Preferred Stock shall have such rights, preferences, privileges and restrictions, including voting rights, dividend rights,
conversion rights, redemption privileges, and liquidation preferences, as shall be determined by the Board of Directors.
In February 1996, the Board of Directors approved a Shareholder Rights Plan. The rights were distributed in March 1996 as
a dividend at the rate of one right for each share of Common Stock outstanding. No value has been assigned to these rights.
The rights may be exercised to purchase shares of a new series of $.01 par value junior participating preferred stock or to
purchase a number of shares of the Company’s Common Stock which equals the exercise price of the right, $115 divided by
one-half of the then-current market price, upon occurrence of certain events, including the purchase of 20% or more of the