Mattel 2003 Annual Report Download - page 72

Download and view the complete annual report

Please find page 72 of the 2003 Mattel annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 118

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118

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
2003 2002 2001
Provision at federal statutory rates ........................... $259,299 $217,524 $150,504
Increase (decrease) resulting from:
Losses without income tax benefit ....................... 4,903 6,902 13,623
Foreign earnings taxed at different rates, including
withholding taxes .................................. (56,620) (66,428) (37,774)
State and local taxes, net of federal benefit ................ 195 4,875 6,630
Non-deductible amortization and restructuring charges ...... 22 22 2,092
Other .............................................. (4,577) 3,560 (15,985)
Total provision for income taxes ............................ $203,222 $166,455 $119,090
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 $2.7 billion at year end 2003. The additional US income tax on the unremitted foreign earnings, if
repatriated, would be offset in whole or in part by foreign tax credits. The extent of this offset would depend on
many factors, including the method of distribution, timing of the distribution, and the specific earnings
distributed.
As of year end 2003, Mattel has US net operating loss carryforwards totaling $606.9 million and credit
carryforwards of $156.7 million for federal income tax purposes. The net operating loss carryforwards expire
during the years 2006 to 2020, while $150.0 million of the tax credits expire during the years 2004 to 2022 with
the remainder having no expiration date. Utilization of these loss and credit carryforwards is subject to annual
limitations. Mattel has established a valuation allowance for the US carryforwards that are not expected to
provide future tax benefits.
Certain foreign subsidiaries have net operating loss carryforwards totaling $191.1 million ($152.9 million
with no expiration date, $29.4 million expiring during the years 2004 to 2008, and $8.8 million expiring after
2009). Mattel has established a valuation allowance for the non-US carryforwards that are not expected to
provide future tax benefits.
Accounting principles generally accepted in the United States of America require that tax benefits related to
the exercise of stock warrants and nonqualified stock options be credited to additional paid-in capital.
Nonqualified stock options exercised during 2003, 2002 and 2001 resulted in credits to additional paid-in capital
totaling $8.0 million, $4.2 million and $6.0 million, respectively. Stock warrants exercised in 2002 resulted in
credits to additional paid-in capital during 2003 and 2002 of $4.3 million and $5.7 million, respectively.
The IRS has completed its examination of the Mattel, Inc. federal income tax returns through year end 1997
and is currently examining the 1998 through 2001 federal income tax returns.
63