Mattel 2002 Annual Report Download - page 67

Deferred income taxes are provided principally for net operating loss carryforwards, research and
development expenses, certain reserves, depreciation, employee compensation-related expenses, and certain
other expenses that are recognized in different years for financial statement and income tax purposes. Mattel’s
deferred income tax assets (liabilities) are comprised of the following (in thousands):
As of Year End
2002 2001
Operating loss and tax credit carryforwards .................................. $ 627,591 $ 725,709
Excess of tax basis over book basis ........................................ 133,265 130,077
Deferred intangible assets ................................................ 96,844 —
Sales allowances and inventory reserves .................................... 88,816 89,834
Deferred compensation .................................................. 47,975 43,397
Restructuring and integration charges ....................................... 11,896 11,690
Postretirement benefits .................................................. 12,316 12,360
Other ................................................................ 28,744 30,535
Gross deferred income tax assets ...................................... 1,047,447 1,043,602
Excess of book basis over tax basis ........................................ (34,737) (30,249)
Deferred intangible assets ................................................ (19,444) (49,939)
Retirement benefits ..................................................... (1,894) (27,716)
Other ................................................................ (32,873) (26,810)
Gross deferred income tax liabilities .................................... (88,948) (134,714)
Deferred income tax asset valuation allowances .............................. (343,451) (374,448)
Net deferred income tax assets ............................................ $ 615,048 $ 534,440
Management considered all available evidence and determined that a valuation allowance of $343.5 million
was required as of December 31, 2002, for certain tax credit, net operating loss, and capital loss carryforwards
that would likely expire prior to their utilization. Management believes that it is more likely than not that Mattel
will generate sufficient taxable income in the appropriate carryforward periods to realize the benefit of the
remaining net deferred tax assets of $615.0 million.
Differences between the provision for income taxes for continuing operations at the US federal statutory
income tax rate and the provision in the consolidated statements of operations are as follows (in thousands):
For the Year
2002 2001 2000
Provision at federal statutory rates ................................... $217,524 $150,504 $ 78,898
Increase (decrease) resulting from:
Losses without income tax benefit ............................... 6,902 13,623 12,777
Foreign earnings taxed at different rates, including withholding taxes . . . (66,428) (37,774) (37,167)
State and local taxes, net of federal benefit ........................ 4,875 6,630 (6,435)
Non-deductible amortization and restructuring charges ............... 22 2,092 2,093
Other ...................................................... 3,560 (15,985) 5,081
Total provision for income taxes .................................... $166,455 $119,090 $ 55,247
Appropriate US and foreign income taxes have been provided for earnings of foreign subsidiary companies
that are expected to be remitted in the near future. The cumulative amount of undistributed earnings of foreign
subsidiaries that Mattel intends to permanently invest and upon which no deferred US income taxes have been
provided is $2.3 billion at December 31, 2002. The additional US income tax on the unremitted foreign earnings,
if repatriated, would be offset in whole or in part by foreign tax credits.
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