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Show MARCONA CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Note 8Long-term debt(Continued): (b) Events (unaudited) subsequent to date of accountants' February 13, 1976 report-On March 31, 1976, Marcona made a $500,000 installment payment on the $18 million notes payable to banks referred to above. Although it was initially expected that the agreement with Utah (see Note 4) would close by March 31, 1976, the agreement with respect to the SAMARCO project did not close until September 10, 1976. Upon closing Marcona repaid the then outstanding $17.5 million notes payable to banks from funds advanced by Utah. That advance, together with other working capital advances available from Utah, will bear interest at 2% over the prime rate charged to responsible commercial borrowers by Bank of America. Note 9Taxes on income: Income tax expense included in earnings for the year before extraordinary item is as follows (in thousands): Year Ended December 31 1971 1972 1973 1974 1975 Federal: Current............................................ $ 284 Deferred........................................... $7,500 $3,200 (548) State-Current....................................... 383 $ 711 $ 953 913 1,175 Foreign: Current............................................ 1,716 551 391 6 Deferred.......................................... 725 (104) (212) (4,448) 489 $8,608 $2,323 $1,292 $_56 $1,406 Income tax credits of $30,700,000 applicable to the 1975 provision for loss on expropriation of Peruvian mining assets represent the reversal of prior years' deferred tax provisions of $30,152,000 in recognition of the tax loss created by the expropriation and a tax benefit of $548,000 relating to currently deductible costs and expenses included in the extraordinary item. For financial reporting purposes, the extraordinary charge has created operating loss carry-forwards at December 31, 1975 of approximately $6,200,000 which if utilized in future years will be accounted for as an extraordinary credit. Extraordinary shipping losses of $12,500,000 incurred by foreign shipping subsidiaries have no related tax benefit. Cumulative undistributed earnings of foreign subsidiaries which have been, or are intended to be, invested for an indefinite period of time, exclusive of those amounts which if remitted would result in little or no tax, aggregate $99,000,000 at December 31, 1975. F-56 MARCONA CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Note 9-Taxes on income-(Continued): Deferred income tax expense results from timing differences in the recognition of certain revenues, costs and expenses for tax and financial reporting purposes. The sources of these differences and the tax effect of each were as follows (in thousands): Year Ended December 31 1973 1974 1975 Foreign: Recognition of portion of prepayment of Peruvian taxes expensed on tax return when paid....................................... $(316) New Zealand deferred taxes resulting from tax holiday........ 104 $ 381 $489 Elimination of net Peruvian deferred tax credits due to existence of Peruvian tax loss carry-forwards..................... (4,829) (212) (4,448) 489 U.S. federal: Deferred U.S. taxes reinstated as a result of above elimination of net Peruvian deferred tax credits............................. 4,049 Severance indemnities charged to expense on books but not deductible until paid............................................................ (636) (806) (470) Interest on Peruvian Banco de la Nacion debt expensed on tax return and deferred on books........................................ 1,446 1,273 580 Excess of book over tax depreciation...................................... (419) (696) (263) U.S. foreign tax credits attributable to deferred foreign taxes provided above........................................................... ( 104) (381) (247) Other, net................................................................................. (287) (239) ( 148) _ 3,200 (548) $ (212) $(1,248) $ (59) - Total income tax expense is less than an amount computed by applying the U.S. Federal income tax rate of 48% to earnings before income taxes and extraordinary item for the following reasons (in thousands): Year Ended December 31 1973 1974_ 1975 Percent Percent Percent of Pretax of Pretax of Pretax Amount Earnings Amount Earnings Amount Earnings Computed "expected" tax expense................................................. $10,304 48.0% $ 9.719 48.0% $2,319 48.0% Increases (reductions) resulting from: Foreign subsidiaries' earnings indefinitely reinvested............ (9.936) (46.3) (11.157) (55.1) (966) (20.0) Percentage depletion................................................................ (112) (0.5) (394) (8.2) Federal tax refund.................................................................... (264) (5.5) Foreign taxes, net of federal income tax benefit..................... 339 1.6 (4,649) (23.0) (58) (12) Deferred U.S. taxes reinstated after elimination of net Peruvian deferred taxes........................................................ 4,049 20 0 State taxes, net of federal income tax benefit.......................... 496 2.3 423 2 1 671 14 0 Reversals of originating timing differences in amounts less than at statutory rates........................................................... 1,138 5 6 98 2 Other......................................................................................... _89 _4 645 JU Actual income tax expense............................................................... $ 1,292 6.0% IS_56 0.3% $1,406 29.1% F-57 |