Mattel 2003 Annual Report Download - page 71

The provision for current and deferred income taxes consists of the following (in thousands):
For the Year
2003 2002 2001
Current
Federal ............................................ $ 55,904 $ 27,762 $ 28,748
State .............................................. 6,100 8,300 4,700
Foreign ............................................ 127,629 109,814 75,786
189,633 145,876 109,234
Deferred
Federal ............................................ 25,989 42,949 787
State .............................................. (5,800) (800) 5,500
Foreign ............................................ (6,600) (21,570) 3,569
13,589 20,579 9,856
Total provision for income taxes ............................ $203,222 $166,455 $119,090
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
2003 2002
Operating loss and tax credit carryforwards ........................... $495,075 $ 627,591
Excess of tax basis over book basis ................................. 152,555 133,265
Sales allowances and inventory reserves ............................. 86,461 88,816
Deferred intangible assets ......................................... 85,321 96,844
Deferred compensation ........................................... 40,484 47,975
Postretirement benefits ........................................... 16,840 12,316
Restructuring and other charges .................................... 6,501 11,896
Other ......................................................... 20,458 28,744
Gross deferred income tax assets ............................... 903,695 1,047,447
Excess of book basis over tax basis ................................. (40,626) (34,737)
Deferred intangible assets ......................................... (24,451) (19,444)
Retirement benefits .............................................. — (1,894)
Other ......................................................... (28,281) (32,873)
Gross deferred income tax liabilities ............................ (93,358) (88,948)
Deferred income tax asset valuation allowances ....................... (208,878) (343,451)
Net deferred income tax assets ..................................... $601,459 $ 615,048
Management considered all available evidence and determined that a valuation allowance of $208.9 million
was required as of year end 2003 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 $601.5 million.
During 2003, capital loss carryforwards were utilized for tax purposes. The transaction utilizing the
carryforwards resulted in no net tax benefit to Mattel. Accordingly, both the capital loss carryforward and the
associated valuation allowance were reduced during 2003.
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