48 49
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
Income Taxes
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 
A reconciliation of the statutory federal income tax rate to the Com-
pany’s effective income tax rate is as follows:
  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%
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:
(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)  
Shareholders’ Equity and Earnings Per Share
  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 – – – 
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): 
    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
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. 
Components of other comprehensive income (loss) consist of 
the following:
(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