Symantec 1997 Annual Report Download - page 49

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SYMANTEC CORPORATION
reference (prime) interest rate (8.50% at March 31, 1997), the
U.S. offshore rate plus 1.25%, a CD rate plus 1.25% or London
Interbank Offering Rate (“LIBOR”) plus 1.25%, at the
Company’s discretion. The line of credit requires bank
approval for the payment of cash dividends. Borrowings
under this line are unsecured and are subject to the Company
maintaining certain financial ratios and profits. The
Company was in compliance with the line of credit covenants
as of March 31, 1997. At March 31, 1997, there was approxi-
mately $0.3 million of standby letters of credit outstanding
under this line of credit. There were no borrowings out-
standing under this line at March 31, 1997.
Note 6. Commitments
Symantec leases all of its facilities and certain equipment
under operating leases that expire at various dates through
2026. The Company currently subleases some space under
various operating leases which will expire at various dates
through 2000.
The future fiscal year minimum operating lease
commitments were as follows at March 31, 1997:
(In thousands)
1998 $ 15,800
1999 15,029
2000 13,831
2001 10,612
2002 7,639
Thereafter 24,352
Operating lease commitments 87,263
Sublease income (5,343)
Net operating lease commitments $ 81,920
Rent expense charged to operations totaled approxi-
mately $12.4 million, $11.3 million and $9.7 million for the
years ended March 31, 1997, 1996 and 1995, respectively.
In fiscal 1997, Symantec entered into lease agreements
for two existing office buildings, land and one office building
under construction in Cupertino, California. The lease agree-
ments are for seven years and the lease payments per year
total approximately $1.0 million in fiscal 1997, $4.1 million
in fiscal 1998 and $4.8 million in fiscal years 1999 through
2004. Lease payments are based on the three month LIBOR
in effect at the beginning of each fiscal quarter. Symantec has
the right to acquire the related properties at any time during
the seven year lease period. If at the end of the lease term
Symantec does not renew the lease, purchase the property
under lease or arrange a third party purchase, then the
Company will be obligated to the lessor for a guaranteed
residual amount equal to a specified percentage of the
Company’s purchase price of the property. Symantec would
also be obligated to the lessor for all or some portion of this
amount if the price paid by the third party is below the guar-
anteed residual amount. The guaranteed residual payment on
the lease agreements for the two existing office buildings
totals approximately $38.4 million. The guaranteed residual
payment on the lease agreements for the land and office
building under construction was approximately $7.0 million
at March 31, 1997 and will increase to approximately $31.7
million at the completion of the construction during fiscal
year 1999. As security against this guaranteed residual
payment, Symantec is required to maintain a corresponding
investment in U.S. Treasury securities with maturities not
to exceed three years. Symantec is restricted in its use of
these investments per the terms of the lease agreement. The
investments total approximately $47.4 million and are
classified as non-current restricted investments within the
financial statements.
The Company currently occupies a portion of these
office buildings and has assumed the right to sub-lease
income provided by the other tenants. The sub-lease
agreements have terms expiring in April 1997 through
September 2000.
Note 7. Income Taxes
The components of the provision (benefit) for income taxes
were as follows:
Year Ended March 31,
(In thousands) 1997 1996 1995
Current:
Federal $514 $ (5,882) $ 998
State 302 130 349
International 3,472 2,149 2,825
4,288 (3,603) 4,172
Deferred:
Federal 565 (1,006) 6,431
State 126 — 1,761
International (639) — (1,217)
52 (1,006) 6,975
$ 4,340 $ (4,609) $ 11,147