Kodak 2002 Annual Report Download - page 61

Financials
61
NOTE 13: INCOME TAXES
The components of earnings from continuing operations before
income taxes and the related provision for U.S. and other income
taxes were as follows:
(in millions) 2002 2001 2000
Earnings (loss) before
income taxes
U.S. $ 217 $ (266) $ 1,294
Outside the U.S. 729 381 838
Total $ 946 $ 115 $ 2,132
U.S. income taxes
Current provision (benefit) $56 $ (65) $ 145
Deferred (benefit) provision (31) (67) 225
Income taxes outside the U.S.
Current provision 101 177 268
Deferred provision (benefit) 22 (5) 37
State and other income taxes
Current provision 12 335
Deferred (benefit) provision (7) (9) 15
Total $ 153 $ 34 $ 725
The net losses from discontinued operations for 2002 and
2001 were $23 million and $5 million, respectively, which
included tax benefits of $15 million and $2 million, respectively.
There were no discontinued operations in 2000.
The differences between income taxes computed using the
U.S. federal income tax rate and the provision for income taxes
for continuing operations were as follows:
(in millions) 2002 2001 2000
Amount computed using the
statutory rate $ 331 $ 40 $ 746
Increase (reduction) in taxes
resulting from:
State and other income taxes,
net of federal 3(4) 33
Goodwill amortization —45 40
Export sales and manufacturing
credits (23) (19) (48)
Operations outside the U.S. (96) (10) (70)
Valuation allowance 56 (18) (9)
Business closures, restructuring
and land donation (99) ——
Tax settlement —(11) —
Other, net (19) 11 33
Provision for income taxes $ 153 $ 34 $ 725
During the second quarter of 2002, the Company recorded a tax
benefit of $45 million relating to the closure of its PictureVision
subsidiary. The decision to close the subsidiary was preceded by
unsuccessful attempts to sell the subsidiary. As a result of these
activities, the Company made the formal decision in the second quarter
of 2002 to close the subsidiary, as a determination was made that the
business was worthless for tax purposes. Accordingly, the Company
recorded a $45 million tax benefit in the second quarter of 2002 based
on the Company’s remaining tax basis in the PictureVision stock.
During the third quarter of 2002, the Company recorded a
tax benefit of $46 million relating to the consolidation of its
photofinishing operations in Japan and the loss realized from the
liquidation of a subsidiary as part of this consolidation. The
Company expects this loss to be utilized during the next five
years to reduce taxable income from operations in Japan.
During the fourth quarter of 2002, the Company recorded an
adjustment of $22 million to reduce its income tax provision due to
a decrease in the estimated effective tax rate for the full year. The
decrease in the effective tax rate was attributable to an increase in
earnings in lower tax rate jurisdictions relative to original
estimates. Additionally, in the fourth quarter of 2002, the Company
recorded a tax benefit of $8 million relating to a land donation.
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 of 2001 the
Company recorded an adjustment of $20 million to reduce its
income tax provision due to a decrease in the estimated effective
tax rate for the full year. The decrease in the effective tax rate
was primarily attributable to an increase in earnings in lower tax
rate jurisdictions relative to original estimates, 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) 2002 2001
Deferred tax assets
Pension and postretirement obligations $ 988 $ 867
Restructuring programs 144 122
Foreign tax credit 99 34
Employee deferred compensation 187 120
Inventories 75 81
Tax loss carryforwards 16 56
Other 558 723
Total deferred tax assets 2,067 2,003
Deferred tax liabilities
Depreciation 700 551
Leasing 156 188
Other 341 596
Total deferred tax liabilities 1,197 1,335
Valuation allowance 72 56
Net deferred tax assets $ 798 $ 612