Quest Diagnostics 2003 Annual Report Download - page 88

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(dollars in thousands unless otherwise indicated)
The components of income tax expense for 2003, 2002 and 2001 were as follows:
2003 2002 2001
Current:
Federal ........................................................ $214,729 $105,799 $107,629
State and local ................................................ 51,771 23,396 25,727
Foreign ....................................................... 728 627 1,490
Deferred:
Federal ........................................................ 29,271 73,002 (452)
State and local ................................................ 4,582 17,399 (108)
Total ........................................................ $301,081 $220,223 $134,286
A reconciliation of the federal statutory rate to the Company’s effective tax rate for 2003, 2002 and 2001
was as follows:
2003 2002 2001
Tax provision at statutory rate .................................... 35.0% 35.0% 35.0%
State and local income taxes, net of federal benefit ................ 5.0 5.0 5.0
Non-deductible goodwill amortization .............................. - - 4.4
Impact of foreign operations ...................................... 0.2 0.2 0.5
Non-deductible meals and entertainment expense ................... 0.3 0.3 0.4
Other, net ....................................................... 0.3 0.1 -
Effective tax rate .............................................. 40.8% 40.6% 45.3%
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets at
December 31, 2003 and 2002 were as follows:
2003 2002
Current deferred tax asset:
Accounts receivable reserve ..................................... $ 33,797 $ 30,449
Liabilities not currently deductible .............................. 65,352 67,173
Accrued settlement reserves .................................... 4,972 3,456
Accrued restructuring and integration costs ...................... 4,854 1,622
Total ........................................................ $108,975 $102,700
Non-current deferred tax asset:
Liabilities not currently deductible .............................. $ 44,978 $ 40,422
Net operating loss carryforwards ................................ 17,914 1,652
Accrued restructuring and integration costs ...................... 1,613 3,334
Depreciation and amortization .................................. (14,870) (15,652)
Total ........................................................ $ 49,635 $ 29,756
As of December 31, 2003, the Company had estimated net operating loss carryforwards for federal and
state income tax purposes of $45 million and $430 million, respectively, which expire at various dates through
2023. As of December 31, 2003 and 2002, deferred tax assets associated with net operating loss carryforwards
for federal and state income tax purposes of $51 million and $29 million, respectively, have each been reduced
by a valuation reserve of $33 million and $27 million respectively.
Income taxes payable at December 31, 2003 and 2002 were $29 million and $20 million, respectively, and
consisted primarily of federal income taxes payable of $22 million and $23 million, respectively.
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