Kodak 2001 Annual Report Download - page 68

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Note 13: Income Taxes
The components of earnings before income taxes and the related
provision for U.S. and other income taxes were as follows:
(in millions) 2001 2000 1999
Earnings (loss) before
income taxes
U.S. $(266) $1,294 $ 1,398
Outside the U.S. 374 838 711
Total $108 $2,132 $ 2,109
U.S. income taxes
Current (benefit) provision $(65) $145 $ 185
Deferred (benefit) provision (69) 225 215
Income taxes outside the U.S.
Current provision 177 268 225
Deferred (benefit) provision (5) 37 23
State and other income taxes
Current provision 335 60
Deferred (benefit) provision (9) 15 9
Total $32 $725 $ 717
The differences between the provision for income taxes and income taxes
computed using the U.S. federal income tax rate were as follows:
(in millions) 2001 2000 1999
Amount computed using
the statutory rate $38 $746 $ 738
Increase (reduction) in
taxes resulting from:
State and other income
taxes, net of federal (4) 33 45
Goodwill amortization 45 40 36
Export sales and
manufacturing credits (19) (48) (45)
Operations outside the U.S. (10) (70) (41)
Valuation allowance (18) (9) 5
Tax settlement (11) ––
Other, net 11 33 (21)
Provision for income taxes $32 $725 $ 717
During the third quarter of 2001, the Company reached a favorable tax
settlement, which resulted in a tax benefit of $11 million. In addition,
during the fourth quarter the Company recorded a $20 million tax benefit
due to a reduction in the estimated effective tax rate for the full year. The
reduction in the estimated effective tax rate was primarily attributable to a
shift in actual earnings versus estimates toward lower tax rate jurisdictions,
and an increase in creditable foreign tax credits as compared to estimates.
The significant components of deferred tax assets and liabilities
were as follows:
(in millions) 2001 2000
Deferred tax assets
Postemployment obligations $867 $916
Restructuring programs 122 –
Employee deferred compensation 120 116
Inventories 99 139
Tax loss carryforwards 56 103
Other 739 768
Total deferred tax assets 2,003 2,042
Deferred tax liabilities
Depreciation 612 555
Leasing 188 225
Other 535 591
Total deferred tax liabilities 1,335 1,371
Valuation allowance 56 103
Net deferred tax assets $612 $568
Deferred income tax assets (liabilities) are reported in the following
components within the Consolidated Statement of Financial Position:
(in millions) 2001 2000
Deferred income tax charges (current) $521 $575
Other long-term assets 201 88
Accrued income taxes (29) (34)
Other long-term liabilities (81) (61)
Net deferred income tax assets $612 $568
The valuation allowance is primarily attributable to certain net operating
loss carryforwards outside the U.S. The primary reason for the decline in
the valuation allowance from 2000 to 2001 was attributable to utilization
of tax loss carryforwards by certain units outside the U.S. A majority of
the net operating loss carryforwards are subject to a five-year expiration
period. Management believes that it is more likely than not that it will
generate taxable income in certain jurisdictions sufficient to realize the
remaining tax benefit associated with the future deductible temporary
differences identified above. This belief is based upon a review of all
available evidence, including historical operating results and projections
of future taxable income.
Retained earnings of subsidiary companies outside the U.S. were
approximately $1,491 million and $1,574 million at December 31, 2001
and 2000, respectively. Retained earnings at December 31, 2001 are
considered to be reinvested indefinitely. It is not practicable to determine
the deferred tax liability for temporary differences related to these
retained earnings if they were to be remitted.