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NOTE 12 (CONTINUED)
The components of the net deferred tax assets as of March 31, 1999 and 1998 consist of:
(In thousands) 1999 1998
Deferred tax assets:
Accruals, reserves and other expenses $ 76,015 $ 50,096
Maxis Federal and State loss carryforwards – 2,088
Foreign loss and credit carryforwards – 11,514
Total gross deferred tax assets 76,015 63,698
Less: valuation allowance – (11,514)
Net deferred tax assets $ 76,015 $ 52,184
Deferred tax liabilities:
Undistributed earnings of DISC (1,784) (2,081)
Prepaid royalty expenses (43,681) (32,422)
Unrealized gains on marketable securities (1,395) (848)
Other (949) (147)
Total gross deferred tax liabilities $(47,809) $(35,498)
Net deferred tax asset $ 28,206 $ 16,686
At March 31, 1999, deferred tax assets of $25,406,000 were included in other current assets.
The differences between the statutory income tax rate and the Company’s effective tax rate, expressed as a percentage
of income before provision for income taxes, for the years ended March 31, 1999, 1998 and 1997 were as follows:
1999 1998 1997
Statutory Federal tax rate 35.0% 35.0% 35.0%
State taxes, net of Federal benefit 1.5 1.0 0.8
Differences between statutory rate
and foreign effective tax rate (2.5) (2.2) (1.0)
Foreign loss without tax benefit – – 1.7
Research and development credits (2.1) (0.6) –
Nondeductible acquisition costs 7.4 – –
Other (1.0) (0.2) (2.3)
38.3% 33.0% 34.2%
The Company provides for U.S. taxes on an insignificant portion of the undistributed earnings of its foreign subsidiaries
and does not provide taxes on the remainder. At March 31, 1999, the undistributed foreign earnings of the foreign
subsidiaries amounted to approximately $122,000,000. If these earnings were distributed to the parent company, foreign
tax credits available under current law would substantially eliminate the resulting Federal tax liability.
The Company’s U.S. income tax returns for the years 1992 through 1995 have been examined by the Internal Revenue
Service (IRS). In 1998, the Company received a notice of deficiencies from the IRS. These deficiencies relate primarily
to operations in Puerto Rico, which the Company is contesting in Tax Court. The Company believes that any additional
liabilities, if any, that arise from the outcome of this examination will not be material to the Company’s consolidated
financial statements.