Southwest Airlines 2003 Annual Report Download - page 65

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(In millions) 2
2
003 2002
DEFERRED TAX LIABILITIES:
Accelerated depreciation 1
1
,640$ 1,440$
Scheduled airframe maintenance 7
7
7 71
Fuel hedges 7
7
9 35
Other 1
1
9 26
Total deferred tax liabilities 1
1
,815 1,572
DEFERRED TAX ASSETS:
Deferred gains from sale and
leaseback of aircraft 8
8
9 96
Capital and operating leases 7
7
3 77
Accrued employee benefits 1
1
08 86
State taxes 4
4
7 43
Other 4
4
0 37
Total deferred tax assets 3
3
57 339
Net deferred tax liability 1
1
,458$ 1,233$
The provision for income taxes is composed of the following:
(In millions) 2
2
003 2002 2001
CURRENT:
Federal 7
7
3$ (19)$ 99$
State 1
1
0 1 10
Total current 8
8
3 (18) 109
DEFERRED:
Federal 1
1
70 157 187
State 1
1
3 13 21
Total deferred 1
1
83 170 208
2
2
66$ 152$ 317$
For the year 2002, Southwest Airlines Co. had a tax net operating loss of $163 million for federal income tax
purposes. This resulted in a federal tax refund due to utilization of this net operating loss as a carryback to
prior taxable years. This refund, estimated at $51 million at December 31, 2002, was included in “Accounts
and other receivables” in the Consolidated Balance Sheet at December 31, 2002 and was collected in 2003.
The effective tax rate on income before income taxes differed from the federal income tax statutory rate for the
following reasons:
(In millions) 2
2
003 2002 2001
Tax at statutory
U.S. tax rates 2
2
47$ 138$ 290$
Nondeductible items 7
7
6 7
State income taxes,
net of federal benefit 1
1
5 9 20
Other, net (
(
3) (1) -
Total income
tax provision 2
2
66$ 152$ 317$
The Internal Revenue Service (IRS) regularly examines the Company’s federal income tax returns and, in the
course of which
,
ma
y
p
ro
p
ose ad
j
ustments to the Com
p
an
y
’s federal income tax liabilit
y
re
p
orted on such