APM's tax situation:
From APM's March quarterly report:
The Company has no income tax provison, other than minimum tax, due to the utilization of the Company's net operating losses in the United States and the fact that the Company operates in Malaysia where it has a tax holiday until 1999. It is expected that the net operating losses will be fully utilized in fiscal 1998.
In last year's annual report, APM reported a US net operating loss carryforward of $62.7 million and net deferred tax assets of $38.8 million. For the just-completed FY, APM reported profits before taxes of $100.3 million. Their effective tax rate in the year just finished was about 2%.
My question to anyone with the information is: how much of the tax credits and operating-loss carryforward would APM likely have comsumed in FY 97 and when will the company need to realize a higher tax rate and what will this effective rate likely be?
Not being an accountant, I don't know what the corporate tax rate would/should have been for last year to figure how much of the tax credit APM would have utilized. APM reported its profits for operation in the US and Asia separately in its last annual report and they were much higher in Asia than in the US. Reported effective tax rates for similar companies are:
WDC 15%
RDRT 24%
QNTM 26%
HTCH 22%
IOM 35%
These rates, of course, are net of all credits and probably all of these companies have some for of tax haven status for foreign manufacturing that affects the above rates.
RDRT reported:
The Company's [RDRT's} estimated annual effective tax rate decreased to 24.0% for the nine months ended June 30, 1997, compared to 48.3% for the nine months ended June 30, 1996. The decrease in the estimated annual effective tax rate for fiscal 1997 is primarily due to lower net tax from foreign operations.
Given their statement, I would assume that APM will not have any significant tax liability for its Asian operation in FY 98 yet. Furthermore, if one assumes that the estimate of $2.35 EPS of Salomon is correct, then APM would earn about $70,000,000 in FY 98, not the $100,000,000 upon which their original statement "It is expected that the net operating losses will be fully utilized in fiscal 1998" may have been based. Of course, when APM made its statement in last years annual report it did not yet know that it would earn $100,000,000 so I may be far off in this assumption and it could be used much earlier than that or could even be almost all gone. However, I am confused in just how the "net operating losses of $62.7 million" and "deferred tax assets of $38.8 million" interplay on taxes and the role of the continued tax holiday in Malaysia for the full FY. With its gain of $100,000,000 in this year is the $62.7 million not already all be gone and all that is left is part of the $38.8, which is what what is being consumed to keep taxes down in FY 97? If the $62.7 million is balanced against the $100,000,000 then would the net taxable income upon which they would have to have paid taxes except for the tax credits be about $37 million?
I am certain that people on this thread and myself would appreciate help from anyone to answer these questions. |
