Creative 2002 Annual Report Download - page 44

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – INCOME TAXES (Cont’d)
Creative had Irish net operating loss carryforward of approximately $1.9 million and $23.7 million and US net operating
loss carryforward of approximately $47.8 million and $41.9 million, as at June 30, 2002 and June 30, 2001, respectively.
The Irish net operating losses have an indefinite carryforward period while the US net operating losses expire between
2005 to 2021. The utilization of these net operating losses by Creative is subject to certain conditions.
A full valuation allowance has been recorded for Creative’s deferred tax assets at June 30, 2002 and 2001, as management
believes substantial uncertainty exists regarding the realizability of these assets.
Creative has United States tax deductions not included in the net operating loss carryforward described above aggregating
approximately $53.6 million at June 30, 2002 and June 30, 2001, as a result of the exercise of employee stock options,
the tax benefit of which has not been realized. The tax benefit of the deductions, when realized will be accounted for as
a credit to additional paid-in capital rather than a reduction of the income tax provision.
NOTE 10 – CREDIT FACILITIES AND SHORT TERM OBLIGATIONS
On March 13, 1996, Creative Technology Centre Pte Ltd (“CTC”), a Singapore subsidiary of Creative, entered into an
agreement with two banks for an eight year term loan facility for up to S$60.0 million ($34.0 million) to finance the
construction of Creative’s headquarters building in Singapore. The loan is repayable in nineteen quarterly installments
comprising eighteen installments of S$1.5 million ($0.9 million) and a final installment for the remaining S$30.9 million
($17.6 million). The repayment commenced on July 5, 1998. The interest on the outstanding loan balance is payable at
the banks’ cost of funds plus 1.25%. The interest rate charged for fiscal 2002 was at 2.19%. The loan is secured by a first
mortgage on the building and by way of a fixed and floating charge over all assets of CTC. At June 30, 2002, S$33.9 million
($19.2 million) was outstanding and repayable by fiscal year 2003.
A portion of the construction of the headquarters building is also being financed in equal parts by Creative and Bukit
Frontiers Pte Ltd. (“BFPL”), a company owned by Creative’s Chairman and CEO, Sim Wong Hoo. At June 30, 2002, loans
extended and equity contributed by Bukit Frontiers Pte Ltd. totaled S$12.5 million ($7.1 million) and S$0.5 million ($0.4
million), respectively.
Creative’s newly acquired subsidiary, 3Dlabs, has an overdraft facility for 2.0 million Pounds Sterling expiring on December
31, 2002 and the outstanding balance was $3.7 million as at June 30, 2002. The facility charges interest at a rate of 1.0%
above the bank’s currency base rate if the overdraft balance is less than 2.0 million Pounds Sterling and 4.0% above the
bank’s currency base rate on any amount exceeding 2.0 million Pounds Sterling. The bank’s currency base rate was 4.0%
at June 30, 2002. A $3.5 million restricted investment with a Bermuda financial institution is held as collateral for this
facility in the form of a certificate of deposit (see Note 1).
In August 2000, 3Dlabs entered into a $1.0 million credit facility to finance certain software purchases. The facility
requires equal quarterly installments of $0.25 million and expired December 31, 2001. The repayments under the credit
facility were revised in 2001, resulting in equal monthly repayments of $0.08 million commencing January 2002. The
advances under the facility accrue interest at a per annum rate of the bank’s currency base rate of 4.0% plus 1%. At June
30, 2002, $0.75 million was outstanding. A $1.0 million restricted investment with a Bermuda financial institution was
held as collateral for this facility in the form of a certificate of deposit (see Note 1).