Income Taxes Shareholders’ Equity and Earnings Per Share H O N I N D U S T R I E S I n c . a n d S U B S I D I A R I E S Significant components of the provision for income taxes are as follows: (In thousands) 2003 2002  2001  Current: Federal $ 49,721 $ 38,966  $ 32,393 State 4,159 3,473  2,442 53,880  42,439  34,835 Deferred (1,054) 6,755  7,019 $ 52,826 $ 49,194  $ 41,854 2003 2002  2001 Common Stock, $1 Par Value  Authorized  200,000,000 200,000,000 200,000,000 Issued and outstanding  58,238,519 58,373,607  58,672,933 Preferred Stock, $1 Par Value  Authorized  2,000,000 2,000,000  2,000,000 Issued and outstanding  – –  – 2003 2002  2001  Federal statutory tax rate  35.0% 35.0%  35.0% State taxes, net of federal  tax effect  1.8 1.6  1.6 Credit for increasing research activities  (2.0) (1.6)  – Extraterritorial income  exclusion  (0.5) (1.0)  – Other – net  0.7 1.0  (0.6) Effective tax rate  35.0% 35.0%  36.0% 2003 2002 Numerators:  Numerators for both basic and  diluted EPS net income $ 98,105,000 $ 91,360,000 Denominators:  Denominator for basic EPS weighted-  average common shares outstanding  58,178,739 58,789,851 Potentially dilutive shares from stock  option plans  366,614 231,220 Denominator for diluted EPS  58,545,353 59,021,071 Earnings per share – basic  $  1.69 $  1.55 Earnings per share – diluted  $  1.68 $  1.55 (In thousands) 2003 2002  2001  Net long-term deferred  tax liabilities: Tax over book depreciation  $ (28,103) $ (34,398)  $ (38,759) OPEB obligations  182 3,581  3,197 Compensation  4,912 3,821  2,519 Goodwill  (18,044) (14,173)  (5,550) Other – net  3,320 4,055  (1,039) Total net long-term  deferred tax liabilities   (37,733) (37,114)   (39,632) Net current deferred tax assets: Workers’ compensation,  general, and product  liability accruals  298 1,517  1,119 Vacation accrual  4,754 4,617  4,002 Integration accruals  – –  (3,766) Inventory differences  4,343 5,101  1,969 Plant closing accruals  528 821  3,302 Deferred income  (5,462) (3,820)  – Warranty accruals  2,886 2,369  1,606 Other – net  6,982 (504)   6,708 Total net current deferred tax assets  14,329 10,101  14,940 Net deferred tax  (liabilities) assets  $(23,404) $ (27,013)  $ (24,692) (In thousands) 2003 2002  2001  Foreign currency translation adjustments – net of tax  $  45 $  –  $ 109 Change in unrealized gains (losses)  on marketable securities – net of tax  (690)  (322)  42 Other comprehensive  income (loss)  $ (645) $ (322)  $ 151 49 Components of other comprehensive income (loss) consist of  the following: Certain exercisable and nonexercisable stock options were not included  in the computation of diluted EPS for fiscal year 2003 and 2002,  because the option prices were greater that the average market prices for  the applicable periods. The number of stock options outstanding which  met this criterion for 2003 was 20,000, with a range of per share exer- cise prices of $42.49–$42.98; and for 2002 was 30,000, with a range of  per share exercise prices of $28.25–$32.22.  Deferred income taxes reflect the net tax effects of temporary dif- ferences between the carrying amounts of assets and liabilities for  financial reporting purposes and the amounts used for income tax  purposes. Significant components of the Company’s deferred tax lia- bilities and assets are as follows: A reconciliation of the statutory federal income tax rate to the Com- pany’s effective income tax rate is as follows: The Company purchased 762,300; 614,580; and 1,472,937 shares of its  common stock during 2003, 2002, and 2001, respectively. The par value  method of accounting is used for common stock repurchases. The excess  of the cost of shares acquired over their par value is allocated to Additional  Paid-In Capital, with the excess charged to Retained Earnings. The following table reconciles the numerators and denom- inators used in the calculation of basic and diluted earnings per  share (EPS): 