Callaway 2003 Annual Report Download - page 68

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CALLAWAY GOLF COMPANY 65
Note 12. Income Taxes
The Company’s income before income tax provision
was subject to taxes in the following jurisdictions for
the following periods:
Years Ended December 31,
(In thousands) 2003 2002 2001
United States $ 50,803 $ 101,897 $ 75,872
Foreign 17,080 9,774 22,320
$ 67,883 $ 111,671 $ 98,192
The provision for income taxes is as follows:
Years Ended December 31,
(In thousands) 2003 2002 2001
Current tax provision:
Federal $ 21,452 $ 26,666 $ 23,056
State 2,954 3,935 3,350
Foreign 7,215 3,811 8,273
Deferred tax expense (benefit):
Federal (8,323) 5,944 3,595
State 120 1,367 1,526
Foreign (1,058) 502 17
Income tax provision $ 22,360 $ 42,225 $ 39,817
Years Ended December 31,
(In thousands) 2003 2002
Deferred tax assets:
Reserves and allowances $ 16,527 $15,089
Depreciation and amortization 6,921 —
Compensation and benefits 7,474 5,513
Effect of inventory overhead adjustment 1,708 1,858
Compensatory stock options and rights 1,328 1,734
Revenue recognition 8,171 7,209
Long-lived asset impairment 625 1,757
Capital loss carryforward — 41
Tax credit carryforwards 1,200 1,458
Energy derivative 8,108 8,129
Other 2,133 2,427
Total deferred tax assets 54,195 45,215
Valuation allowance for
deferred tax assets (3,540) (2,454)
Deferred tax assets, net
of valuation allowance 50,655 42,761
Deferred tax liabilities:
State taxes, net of federal
income tax benefit (1,659) (1,454)
Depreciation and amortization — (1,572)
Net deferred tax assets $ 48,996 $39,735
During 2003, 2002 and 2001, tax benefits related to stock
option exercises were $1,784,000, $5,479,000 and
$14,520,000, respectively. Such benefits were recorded as
a reduction of income taxes payable and an increase in
paid-in capital.
Deferred tax assets and liabilities are classified as current or
noncurrent according to the classification of the related asset
or liability. Significant components of the Company’s
deferred tax assets and liabilities as of December 31, 2003
and 2002 are as follows:
At December 31, 2003, the Company had $1,200,000 of credit
carryforwards primarily relating to state investment tax credits
that expire December 31, 2006.
A valuation allowance has been established due to the
uncertainty of realizing certain tax carryforwards, and a portion
of other deferred tax assets. Based on management’s assessment,
it is more likely than not that all the net deferred tax assets will
be realized through future earnings.