Dell 2002 Annual Report Download - page 45

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Table of Contents
debt agreements. The Senior Notes and Senior Debentures generally contain no restrictive covenants, other than a limitation on liens on the Company's assets
and a limitation on sale-leaseback transactions.
Concurrent with the issuance of the Senior Notes and Senior Debentures, the Company entered into interest rate swap agreements converting the Company's
interest rate exposure from a fixed rate to a floating rate basis to better align the associated interest rate characteristics to its cash and investments portfolio.
The interest rate swap agreements have an aggregate notional amount of $200 million maturing April 15, 2008 and $300 million maturing April 15, 2028. The
floating rates are based on three-month London interbank offered rates ("LIBOR") plus 0.41% and 0.79% for the Senior Notes and Senior Debentures,
respectively. As a result of the interest rate swap agreements, the Company's effective interest rates for the Senior Notes and Senior Debentures were 2.365%
and 2.698%, respectively, for fiscal 2003.
The interest rate swap agreements are designated as fair value hedges, and the terms of the swap agreements and hedged items are such that effectiveness can
be measured using the short-cut method defined in SFAS 133. The differential to be paid or received on the interest rate swap agreements is accrued and
recognized as an adjustment to interest expense as interest rates change. The difference between the Company's carrying amounts and fair value of its long-
term debt and related interest rate swaps was not material at January 31, 2003 and February 1, 2002.
The Company also had a $250 million revolving credit facility that expired in June 2002 and was not subsequently renewed.
NOTE 3 — Income Taxes
The provision for income taxes consists of the following:
Fiscal Year Ended
January 31, February 1, February 2,
2003 2002 2001
(in millions)
Current:
Domestic $ 702 $ 574 $ 964
Foreign 94 59 168
Deferred 109 (148) (174)
Provision for income taxes $ 905 $ 485 $ 958
Income before income taxes and cumulative effect of change in accounting principle included approximately $968 million, $494 million, and $743 million
related to foreign operations in fiscal 2003, 2002, and 2001, respectively.
Deferred taxes have not been provided on excess book basis in the amount of approximately $4.1 billion in the shares of certain foreign subsidiaries because
these basis differences are not expected to reverse in the foreseeable future and are essentially permanent in duration. These basis differences arose primarily
through the undistributed book earnings of the subsidiaries. The basis differences could reverse through a sale of the subsidiaries, the receipt of dividends
from the subsidiaries as well as various other events. Net of available foreign tax credits, residual income tax of approximately $1.1 billion would be due upon
a reversal of this excess book basis.
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