NOTE 6– INCOME TAXES The provision for income taxes is comprised of the following: Areconciliation between the provision for income taxes computed by applying the statutory Federal income tax rate to earnings before income taxes and minority interest and the actual provision for income taxes is as follows: Significant components of the Company’s deferred income tax assets and liabilities as of June 30, 2003 and 2002 were  as follows: As of June 30, 2003 and 2002, the Company had current net deferred tax assets of $116.0 million and $112.4 mil- lion, respectively, which are included in prepaid expenses and other current assets in the accompanying consoli- dated balance sheets, and noncurrent net deferred tax assets of $38.7 million and $72.7 million, respectively. Federal income and foreign withholding taxes have not been provided on $476.6 million, $473.5 million and $476.4 million of undistributed earnings of international subsidiaries at June 30, 2003, 2002 and 2001, respectively. The Company intends to permanently reinvest these earnings in its foreign operations, except where it is able to repatriate these earnings to the United States without any material incremental tax provision. As of June 30, 2003 and 2002, certain international sub- sidiaries had tax loss carryforwards for local tax purposes of approximately $14.7 million and $10.2 million, respectively. With the exception of $3.9 million of losses with an indef- inite carryforward period as of June 30, 2003, these losses expire at various dates through fiscal 2008. Deferred tax assets in the amount of $2.9 million and $1.5 million as of June 30, 2003 and 2002, respectively, have been THEEST{E LAUDER COMPANIES INC. 68 2003 2002 (In millions) Deferred tax assets: Deferred compensation and other payroll related expenses $ 55.4 $ 53.3 Inventory obsolescence and other inventory related reserves 55.9 58.5 Pension plan reserves 7.1 26.2 Postretirement benefit obligations 22.9 25.9 Various accruals not currently deductible 76.4 72.0 Net operating loss and credit carryforwards 16.3 1.5 Other differences between tax and financial statement values 8.0 9.4 242.0 246.8 Valuation allowance for deferred tax assets (2.9) (1.5) Total deferred tax assets 239.1 245.3 Deferred tax liabilities: Depreciation and amortization (84.0) (60.2) Other differences between tax and financial statement values (0.4) — Total deferred tax liabilities (84.4) (60.2) Total net deferred tax assets $154.7 $185.1 YEAR ENDED JUNE 30 2003 2002 2001 (In millions) Provision for income taxes  at statutory rate $170.4 $116.1 $169.2 Increase (decrease) due to: State and local income taxes, net of Federal tax benefit 4.1 3.9 5.3 Effect of foreign operations (1.0) (0.9) (2.9) Domestic royalty expense  not deductible for  U.S. tax purposes — — 1.6 Other nondeductible expenses 1.7 3.2 3.8 Tax credits (12.5) (2.1) — Other, net (2.2) (5.8) (3.0) Provision for income taxes $160.5 $114.4 $174.0 Effective tax rate 33.0% 34.5% 36.0% YEAR ENDED JUNE 30 2003 2002 2001 (In millions) Current: Federal $ 34.8 $ 38.3 $ 72.3 Foreign 84.0 92.2 89.3 State and local 5.2 6.5 7.7 124.0 137.0 169.3 Deferred: Federal 33.5 (13.2) 3.7 Foreign 1.9 (8.9) 0.5 State and local 1.1 (0.5) 0.5 36.5 (22.6) 4.7 $160.5 $114.4 $174.0