Coca Cola 2003 Annual Report Download - page 94

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Coca-Cola Company and Subsidiaries
NOTE 15: INCOME TAXES (Continued)
A reconciliation of the statutory U.S. federal rate and effective rates is as follows:
Year Ended December 31, 2003 2002 2001
Statutory U.S. federal rate 35.0 % 35.0 % 35.0 %
State income taxes—net of federal benefit 0.9 0.9 1.0
Earnings in jurisdictions taxed at rates different from the statutory
U.S. federal rate (10.6)1(6.0) (4.9)
Equity income or loss (2.4)2(2.0)4(0.9)
Other operating charges (1.1)3——
Write-down/sale of certain bottling investments —0.7 5—
Other—net (0.9) (0.9) (0.4)
Effective rates 20.9 % 27.7 % 29.8 %
1Includes approximately $50 million or (0.8) percent tax benefit for the release of tax reserves due
primarily to the resolution of various tax matters.
2Includes the write-down of certain intangible assets held by bottling investments in Latin America.
Refer to Note 2.
3Includes charges for streamlining initiatives. Refer to Note 17.
4Includes charges by equity investees in 2002. Refer to Note 16.
5Includes gains on the sale of Cervejarias Kaiser Brazil, Ltda and the write-down of certain bottling
investments, primarily in Latin America. Refer to Note 16.
Our effective tax rate reflects the tax benefits from having significant operations outside the United States
that are taxed at rates lower than the statutory rate of 35 percent. In 2003, our effective tax rate reflects further
benefit from realization of tax benefits on charges related to streamlining initiatives recorded in locations with
tax rates higher than our effective tax rate.
In 2003, management concluded that it was more likely than not that tax benefits would not be realized on
Coca-Cola FEMSA’s write-down of intangible assets in Latin American in connection with its merger with
Panamco. Refer to Note 2. In 2002, management concluded that it was more likely than not that tax benefits
would not be realized with respect to principally all of the items disclosed in Note 16. Accordingly, valuation
allowances were recorded to offset the future tax benefit of these items resulting in an increase in our effective
tax rate.
Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $8.2 billion at
December 31, 2003. Those earnings are considered to be indefinitely reinvested and, accordingly, no U.S.
federal and state income taxes have been provided thereon. Upon distribution of those earnings in the form of
dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for
foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount
of unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with
its hypothetical calculation; however, unrecognized foreign tax credits would be available to reduce a portion of
the U.S. liability.
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