Creative 2001 Annual Report Download - page 33

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33
Included in fiscal 2001 are deferred tax assets comprising NOLs of $4.8 million and non-deductible reserves of $13.7
million for the United States previously not identified.
At June 30, 2001, Creative had Irish and US net operating loss carryforwards of approximately $23.7 million and
$41.9 million, 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, 2001 and 2000 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 carryforwards described above
aggregating approximately $53.6 million at 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 LONG 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 S$60.0 million ($32.9 million) to finance the
construction of Creative’s headquarters building in Singapore. The loan is repayable in nineteen quarterly installments
comprising of eighteen installments of S$1.5 million ($0.8 million) and a final installment for the remaining S$31.0
million ($17.0 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 2001 was at a range of 3.45%
to 4.50%. 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, 2001, S$39.9 million ($21.9 million) was outstanding.
A portion of the construction of the headquarters building is also being financed in equal parts by Creative and Bukit
Frontiers Pte Ltd., a company owned by one of Creative’s officers, who is also a director. At June 30, 2001, loans
extended and equity contributed by Bukit Frontiers Pte Ltd. totaled S$12.5 million ($6.9 million) and S$0.5 million
($0.4 million), respectively.
Creative has various other credit facilities relating to overdrafts, letters of credit and bank guarantees with several
banks totaling approximately $120.0 million at June 30, 2001. Within these credit facilities, sub-limits have been
set on how Creative may utilize the overall credit facilities. At June 30, 2001, $2.3 million in letters of credit and
$1.4 million in bank guarantees were drawn under these facilities. These facilities bear interest at approximately
the banks’ prime rates.