Mattel 2001 Annual Report Download - page 56

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
2001 2000
Operating loss and tax credit carryforwards ................................ $725,709 $ 797,216
Excess of tax basis over book basis ...................................... 130,077 21,841
Sales allowances and inventory reserves ................................... 89,834 75,785
Deferred compensation ............................................... 43,397 45,371
Restructuring and other charges ......................................... 11,690 27,210
Postretirement benefits ............................................... 12,360 12,440
Other ............................................................ 30,535 31,640
Gross deferred income tax assets .................................... 1,043,602 1,011,503
Deferred intangible assets ............................................. (49,939) (40,374)
Excess of book basis over tax basis ...................................... (30,249) (3,320)
Retirement benefits .................................................. (27,716) (20,872)
Other ............................................................ (26,810) (38,637)
Gross deferred income tax liabilities .................................. (134,714) (103,203)
Deferred income tax asset valuation allowances ............................. (374,448) (364,004)
Net deferred income tax assets .......................................... $534,440 $ 544,296
Management considered all available evidence and determined that a valuation allowance of $374.4
million was required as of December 31, 2001, 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 $534.4 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
2001 2000 1999
Provision at federal statutory rates ................................. $150,504 $78,898 $59,557
Increase (decrease) resulting from:
Losses without income tax benefit ............................. 13,623 12,777 21,170
Foreign earnings taxed at different rates, including withholding taxes .... (37,774) (37,167) (62,488)
State and local taxes, net of federal benefit ....................... 6,630 (6,435) 6,165
Non-deductible amortization and restructuring charges ............... 2,092 2,093 25,986
Other ................................................... (15,985) 5,081 11,387
Total provision for income taxes .................................. $119,090 $55,247 $61,777
Appropriate US and foreign income taxes have been provided for on 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 $1.9 billion at December 31, 2001. The additional US income tax on the unremitted
foreign earnings, if repatriated, would be offset in whole or in part by foreign tax credits.
As of December 31, 2001, Mattel has US net operating loss carryforwards totaling $889.6 million and
credit carryforwards of $139.1 million for federal income tax purposes. The net operating loss carryforwards
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