Humana 2002 Annual Report Download - page 73

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The provision for income taxes was different from the amount computed using the federal statutory rate due
to the following:
For the year ended December 31,
2002 2001 2000
(in thousands)
Income tax provision at federal statutory rate ........................... $73,477 $64,078 $39,897
States and Puerto Rico income taxes, net of federal benefit ................ 10,666 1,225 8,822
Tax exempt investment income ...................................... (10,460) (14,687) (16,915)
Amortization expense .............................................. (641) 17,960 17,202)
Capital loss on sale of workers’ compensation business ................... — 3,545 (42,807)
Capital loss valuation allowance ..................................... 24,528 (3,545) 15,487
Examination settlements ........................................... (32,610) — —
Other,net ....................................................... 2,219 (2,667) 2,252
Provision for income taxes ...................................... $67,179 $65,909 $23,938
During 2002, the capital loss valuation allowance was increased by $24.5 million after we reevaluated
probable capital gain realization in the allowable carryforward period based upon our capital gain experience
beginning in 2000 and consideration of alternative tax planning strategies. In addition, during 2002, the Internal
Revenue Service completed their audit of all open years prior to 2000 which resulted in an adjustment to the
estimated accrual for income taxes.
Deferred income tax balances reflect the impact of temporary differences between the tax bases of assets or
liabilities and their reported amounts in our consolidated financial statements, and are stated at enacted tax rates
expected to be in effect when the reported amounts are actually recovered or settled. Principal components of our
net deferred tax balances at December 31, 2002 and 2001 are as follows:
Assets (Liabilities)
2002 2001
(in thousands)
Investment securities ....................................................... $(14,296) $ (7,831)
Depreciable property and intangible assets ...................................... (79,177) (66,009)
Medical and other expenses payable ........................................... 33,806 32,442
Professional liability risks ................................................... 9,941 9,183
Compensation, severance, and other accruals .................................... 61,246 37,462
Alternative minimum tax credit ............................................... 8,506 26,470
Net operating loss carryforwards .............................................. 18,918 36,727
Capital loss carryforward .................................................... 42,304 44,301
Valuation allowance – capital loss carryforward .................................. (36,470) (11,942)
Total net deferred income tax assets ................................... $44,778 $100,803
Amounts recognized in the consolidated balance sheets:
Other current assets .................................................... $59,144 $ 64,221
Other long-term assets .................................................. — 36,582
Other long-term liabilities ............................................... (14,366) —
Total net deferred income tax assets ................................... $44,778 $100,803
At December 31, 2002, we had approximately $48.6 million of net operating losses to carryforward related
to prior acquisitions. These net operating loss carryforwards, if unused to offset future taxable income, will
expire in 2003 through 2019.
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