The Company’s effective tax rate differs from the federal statutory rate of 35% as a result of the following:
Years Ended December 31,
|
|||
2001
|
2000
|
1999
|
|
| Statutory federal tax rate | 35.00% | 35.00% | 35.00% |
|
|
|||
| Effect of: | |||
| State income taxes, net of federal taxes | 3.40% | 3.06% | 4.00% |
| Amortization of goodwill | 2.19% | 3.13% | 4.72% |
| Tax exempt interest income | (1.46%) | (1.44%) | (1.51%) |
| Other | (1.14%) | 0.15% | 0.64% |
|
|
|||
| Income tax provision | 37.99% | 39.90% | 42.85% |
|
|||
The effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2001 and 2000 are presented below (in thousands):
December 31,
| 2001 |
2000 |
|
|
||
| Deferred tax assets: | ||
| Deferred revenue | $ 4,774 | $ 2,922 |
| Medical liabilities | 5,392 | 5,749 |
| Accounts receivable | 1,710 | 1,900 |
| Deferred compensation | 8,496 | 4,102 |
| Other accrued liabilities | 26,272 | 31,145 |
| Other assets | 4,765 | 7,554 |
| Net operating loss carryforward | 17,708 | 15,854 |
|
|
||
| Gross deferred tax assets | 69,117 | 69,226 |
| Less valuation allowance | (3,252) | (3,252) |
|
|
||
| Deferred tax asset | $ 65,865 | $ 65,974 |
|
|
||
Deferred tax liabilities: |
||
| Property and equipment | $ (11) | $ (5,302) |
| Intangibles | (3,117) | (2,505) |
| Unrealized gain on securities | (4,297) | (2,797) |
|
|
||
| Gross deferred tax liabilities | (7,425) | (10,604) |
|
|
||
| Net deferred tax asset | $ 58,440 | $ 55,370 |
|
||
The valuation allowance for deferred tax assets as of December 31, 2001 and 2000 is $3.3 million due to the Company’s belief that the realization of the deferred tax asset resulting from federal and state net operating loss carryforwards associated with certain acquisitions is doubtful.
F. EMPLOYEE BENEFIT PLANS
As of December 31, 2001, the Company had one stock incentive plan, the Amended and Restated 1998 Stock Incentive Plan (the “Stock Incentive Plan”) under which shares of the Company’s common stock were authorized for issuance to key employees, consultants and directors in the form of stock options, restricted stock and other stock based awards.
Stock-Based Compensation
Under the Stock Incentive Plan, the terms and conditions of option grants are established on an individual basis with the exercise price of the options being equal to not less than 100% of the market value of the underlying stock at the date of grant. Options generally become exercisable after one year in 20% to 25% increments per year and expire ten years from the date of grant. The Stock Incentive Plan is authorized to grant
41