Symantec 1997 Annual Report Download - page 50

48 SYMANTEC CORPORATION
The difference between the Company’s effective income
tax rate and the federal statutory income tax rate as a per-
centage of income (loss) before income taxes was as follows:
Year Ended March 31,
1997 1996 1995
Federal statutory rate 35.0% (35.0)% 35.0%
State taxes, net of federal benefit 2.9 0.3 3.3
Non-deductible acquisition expenses —6.8 2.6
Non-deductible acquired
in-process R&D ——1.1
Impact of international operations (9.2) — (11.2)
Losses for which no benefit
is currently recognizable —16.9 —
Benefit of pre-acquisition
losses of acquired entities (16.5) — (6.7)
Other, net 2.1 0.7 1.0
14.3% (10.3)% 25.1%
The principal components of deferred tax assets were as follows:
March 31,
(In thousands) 1997 1996
Tax credit carryforwards $9,158 $ 8,213
Net operating loss carryforwards 7,969 19,813
Inventory valuation accounts 2,327 2,704
Other reserves and accruals not
currently tax deductible 8,570 9,403
Accrued compensation and benefits 2,392 1,916
Deferred revenue 10,187 5,465
Sales incentive programs 5,005 4,054
Allowance for doubtful accounts 984 1,104
Acquired software 2,613 2,979
Accrued acquisition, restructuring
and other expenses 1,077 2,364
Other 2,868 579
53,150 58,594
Valuation allowance (40,327) (45,719)
$ 12,823 $ 12,875
Realization of the $12.8 million of net deferred tax asset
that is reflected in the financial statements is dependent upon
the Company’s ability to generate sufficient future U.S. taxable
income. Management believes that it is more likely than not
that the asset will be realized based on forecasted U.S. earnings.
Approximately $22.3 million of the valuation allowance
for deferred tax assets is attributable to unbenefitted stock
option deductions, the benefit of which will be credited to
equity when realized. Approximately $4.3 million of the
valuation allowance represents net operating loss and tax
credit carryforwards of various acquired companies that are
limited by separate return limitations and under the “change
of ownership” rules of Internal Revenue Code Section 382
and the remaining $13.7 million of the valuation allowance
relates to unbenefitted temporary differences and net oper-
ating loss and tax credit carryforwards. The change in the
valuation allowance for the years ended March 31, 1997, 1996
and 1995 were a net decrease of $5.4 million and net increases
of $14.8 million and $1.6 million, respectively.
Pretax income (loss) from international operations was
approximately $24.9 million, $(4.1) million and $25.9 million for
the years ended March 31, 1997, 1996 and 1995, respectively.
At March 31, 1997, the Company had tax credit carry-
forwards of approximately $9.2 million that expire in fiscal 1998
through 2011 and net operating loss carryforwards of approx-
imately $19.3 million that expire in fiscal 1999 through 2012.
Note 8. Employee Benefits
401(k) Plan Symantec maintains a salary deferral 401(k) plan
for all of its domestic employees. The plan allows employees
to contribute up to 15% of their pretax salary up to the max-
imum dollar limitation prescribed by the Internal Revenue
Code. Symantec matches 100% of the first $500 of employees’
contributions and then 50% of the employee’s contribution
up to 6% of the employees’ eligible compensation. Company
contributions under the plan were $2.0 million, $1.5 million
and $1.2 million for the years ended March 31, 1997, 1996 and
1995, respectively.
Employee Stock Purchase Plan In October 1989, the Company
established the 1989 Employee Stock Purchase Plan (the
“ESPP”). Subject to certain limitations, Company employees
may purchase, through payroll deductions of 2 to 10% of
compensation, shares of common stock at a price per share
that is the lesser of 85% of the fair market value as of the
beginning of the offering period or the end of the purchase
period. On September 25, 1996, stockholders approved an
amendment to the ESPP which included increasing by 1.4
million to 3.4 million the number of shares reserved for
issuance under the ESPP. As of March 31, 1997, approximately
1.9 million shares had been issued and 1.5 million shares
remain to be issued under the ESPP.
Stock Option Plans The Company maintains stock option
plans pursuant to which an aggregate total of approximately
17.4 million shares of Common stock have been reserved for
issuance as incentive and nonqualified stock options to
employees, officers, directors, consultants, independent
contractors and advisors to the Company (or of any parent,
subsidiary or affiliate of the Company as the Board of