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The 2003 effective tax rate includes the effect of establishing a valuation allowance for a majority of the Company’s net deferred tax assets. The effective tax rate for 2003, absent the deferred tax valuation allowance, would have been 37.6%. The effective tax rates for 2002 and 2001 were 36.6% and 30.8%, respectively. The effective tax rate for 2002 was a larger benefit than 2001 primarily due to a favorable settlement of issues related to prior years estimated taxes. 

Deferred income taxes result from temporary differences in the recognition of income and expense for financial and income tax reporting purposes, and differences between the fair value of assets acquired in business combinations accounted for as purchases for financial reporting purposes and their corresponding tax bases. Deferred income taxes represent future tax benefits or costs to be recognized when those temporary differences reverse. The categories of assets and liabilities that have resulted in differences in the timing of the recognition of income and expense at December 31, 2003 and 2002 were as follows: 

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Including the $138.5 million deferred tax asset valuation allowance recorded in the 2003 fourth quarter, and $2.3 million of valuation allowances for certain state deferred tax assets recorded in 2003, the Company had $178.8 million and $38.0 million in deferred tax asset valuation allowances at December 31, 2003 and 2002, respectively. Based on current tax law, the $29.4 million federal net operating loss tax carryforward deferred tax asset will expire in 2023. The Company also had state net operating loss tax carryforwards of $40.3 million and $38.0 million at December 31, 2003 and 2002, respectively. For most of these state net operating loss tax carryforwards, expiration will occur in 20 years and utilization of the tax benefit is limited to $2 million per year. A valuation allowance has been established for the full value of these state net operating loss carryforwards since the Company has concluded that it is more likely than not that these tax benefits would not be realized prior to expiration. 

At December 31, 2003 and 2002, the balance sheet composition of the Company’s net deferred tax assets and liabilities was as follows: 

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