Kraft 2005 Annual Report Download - page 73

MERRILL CORPORATION ABLIJDE// 7-MAR-06 14:42 DISK126:[06CHI5.06CHI1135]DY1135A.;6
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KRAFT FOODS-FSC CERTIFIED-10K/AR Proj: P1102CHI06 Job: 06CHI1135 File: DY1135A.;6
Merrill Corporation/Chicago [phone] Page Dim: 8.250 X 10.750Copy Dim: 38. X 54.3
received upon stock option exercise or, in the case of restricted stock and rights, the number of shares
corresponding to the unamortized compensation expense. For 2005 and 2004, the number of stock
options excluded from the calculation of weighted average shares for diluted EPS because their effects
were antidilutive (i.e. the cash that would be received upon exercise is greater than the average market
price of the stock during the period) was immaterial. For the 2003 computation, 18 million Class A
common stock options were excluded from the calculation of weighted average shares for diluted EPS
because their effects were antidilutive.
Note 13. Income Taxes:
Earnings from continuing operations before income taxes and minority interest, and provision for
income taxes consisted of the following for the years ended December 31, 2005, 2004 and 2003:
2005 2004 2003
(in millions)
Earnings from continuing operations before income taxes and minority
interest:
United States ......................................... $2,774 $2,616 $3,574
Outside United States ................................... 1,342 1,330 1,621
Total .............................................. $4,116 $3,946 $5,195
Provision for income taxes:
United States federal:
Current ............................................ $ 876 $ 675 $ 967
Deferred ........................................... (210) 69 153
666 744 1,120
State and local ........................................ 115 112 145
Total United States ..................................... 781 856 1,265
Outside United States:
Current ............................................ 466 403 456
Deferred ........................................... (38) 15 91
Total outside United States ................................ 428 418 547
Total provision for income taxes .............................. $1,209 $1,274 $1,812
The loss from discontinued operations for the year ended December 31, 2005, includes additional
tax expense of $280 million from the sale of the sugar confectionery business. The loss from
discontinued operations for the year ended December 31, 2004, included a deferred income tax benefit
of $43 million.
At December 31, 2005, applicable United States federal income taxes and foreign withholding taxes
have not been provided on approximately $3.6 billion of accumulated earnings of foreign subsidiaries
that are expected to be permanently reinvested.
In October 2004, the American Jobs Creation Act (‘‘the Jobs Act’’) was signed into law. The Jobs Act
includes a deduction for 85% of certain foreign earnings that are repatriated. In 2005, the Company
repatriated approximately $500 million of earnings under the provisions of the Jobs Act. Deferred taxes
had previously been provided for a portion of the dividends to be remitted. The reversal of the deferred
taxes more than offset the tax costs to repatriate the earnings and resulted in a net tax reduction of
$28 million in the consolidated income tax provision during 2005, the majority of which was recorded
during the second quarter.
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