Kodak 2004 Annual Report Download - page 74

Financials
72
E A S T M A N฀ K OD A K ฀ C O M PA N Y
NOTE฀14:฀OTHER฀INCOME฀฀฀
(CHARGES),฀NET฀
฀2004฀2003฀ 2002
(in฀millions)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (Restated)฀
Income฀(charges):
Investment฀income฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ $฀฀฀18฀ $฀ 19฀ $฀ 20฀
Loss฀on฀foreign฀exchange฀transactions฀฀฀฀฀฀฀ ฀ (10)฀ ฀ (10)฀ ฀ (19)฀฀฀฀
Equity฀in฀income฀(losses)฀of฀
฀ unconsolidated฀affiliates฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 30฀ ฀ (41)฀ ฀ (106)฀฀
Gain฀on฀sales฀of฀capital฀assets฀฀฀฀฀฀฀฀ ฀ 15฀ ฀ 13฀ ฀ 24
Interest฀on฀past-due฀receivables
฀ and฀finance฀revenue฀on฀sales฀฀฀฀฀฀฀฀฀฀฀ ฀ 4฀฀ ฀ 5฀฀ ฀ 6฀
Minority฀interest฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (2)฀ ฀ (24)฀ ฀ (17)฀
Non-strategic฀venture฀investment฀
฀ impairments฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —฀฀ ฀ (4)฀ ฀ (18)฀฀
Sun฀Microsystems฀settlement฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 92฀ ฀฀ —฀฀ ฀ —
BIGT฀settlement฀ ฀ 9฀ ฀ —฀ ฀ —
Other฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 5฀ ฀ (9)฀ ฀ 9฀
฀ ฀ Total฀฀฀฀฀฀฀฀฀฀ $฀161฀ $฀ (51)฀ $(101)฀฀
NOTE฀15:฀INCOME฀TAXES฀
The฀components฀of฀earnings฀from฀continuing฀operations฀before฀income฀
taxes฀and฀the฀related฀(benefit)฀provision฀for฀U.S.฀and฀other฀income฀taxes฀
were฀as฀follows:
฀ 2004฀ 2003฀ 2002
(in฀millions)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (Restated)฀
Earnings฀(loss)฀before฀income฀taxes฀
฀ U.S.฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ $฀(581)฀ $฀(205)฀ $฀165฀฀
฀ Outside฀the฀U.S.฀฀฀฀ ฀ 487฀ ฀ 309฀ ฀ 729฀ ฀฀฀
฀ Total฀฀฀฀฀฀฀฀฀฀฀฀฀ $฀ (94)฀ $฀ 104฀ $฀894฀฀
U.S.฀income฀taxes฀
฀ Current฀(benefit)฀provision฀฀฀฀฀฀฀ $฀(227)฀ $฀ (88)฀ $฀ 38฀฀฀
฀ Deferred฀benefit฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (73)฀ ฀ (41)฀ ฀ (31)฀
Income฀taxes฀outside฀the฀U.S.
฀ Current฀provision฀฀฀฀฀฀ ฀ 141฀ ฀ 133฀ ฀ 101฀฀
฀ Deferred฀(benefit)฀provision฀฀฀฀฀฀฀฀฀฀ ฀ (2)฀ ฀ (87)฀ ฀ 22฀฀฀
State฀and฀other฀income฀taxes฀฀
฀ Current฀(benefit)฀provision฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (3)฀ ฀ (6)฀ ฀ 10฀฀฀฀
฀ Deferred฀(benefit)฀provision฀฀฀฀฀฀฀ ฀ (11)฀ ฀ 4฀ ฀ (7)฀ ฀
฀ Total฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ $฀(175)฀ $฀ (85)฀ $฀133฀฀฀฀
The฀Company฀recognized฀net฀income฀of฀$475฀million฀from฀discontin-
ued฀operations฀for฀2004,฀which฀was฀net฀of฀a฀tax฀provision฀of฀$275฀million.฀฀
Net฀income฀from฀discontinued฀operations฀for฀2003฀and฀2002฀was฀$64฀
million฀and฀$9฀million,฀respectively,฀which฀was฀net฀of฀tax฀provisions฀of฀$10฀
million฀and฀$6฀million,฀respectively.฀The฀discontinued฀operations฀tax฀provi-
sion฀for฀2003฀includes฀an฀$18฀million฀tax฀benefit฀related฀to฀the฀reversal฀of฀
tax฀reserves฀resulting฀from฀the฀elimination฀of฀uncertainties฀surrounding฀the฀
realizability฀of฀such฀benefits.
The฀differences฀between฀income฀taxes฀computed฀using฀the฀U.S.฀
federal฀income฀tax฀rate฀and฀the฀(benefit)฀provision฀for฀income฀taxes฀for฀
continuing฀operations฀were฀as฀follows:
฀2004฀2003฀ 2002
(in฀millions)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (Restated)฀
Amount฀computed฀using฀the฀statutory
฀ rate฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ $฀ (33)฀ $฀ 36฀ $฀313฀฀
Increase฀(reduction)฀in฀taxes฀
฀ resulting฀from:฀
฀฀฀฀฀฀ State฀and฀other฀income฀taxes,
฀฀฀฀฀฀ ฀ net฀of฀federal฀฀฀฀฀฀฀ ฀ (9)฀ ฀ (3)฀ ฀ 1฀
฀฀฀฀฀฀ Export฀sales฀and฀manufacturing฀
฀ ฀ ฀ credits฀฀฀฀ ฀ (30)฀ ฀ (25)฀ ฀ (23)฀฀
฀฀฀฀฀฀ Operations฀outside฀the฀U.S.฀฀฀ ฀ (89)฀ ฀ (69)฀ ฀ (96)฀ ฀
฀฀฀฀฀฀ Valuation฀allowance฀฀฀฀฀฀ ฀ (10)฀ ฀ 11฀ ฀ 56฀ ฀฀
฀฀฀฀฀฀ Business฀closures,฀restructuring
฀฀฀฀฀฀ ฀ and฀land฀donation฀฀฀฀฀฀฀฀฀ ฀ —฀ ฀ (13)฀ ฀ (99)฀ ฀
฀฀฀฀฀฀ Tax฀settlements,฀including฀interest฀฀฀฀฀฀฀฀ (32)฀ ฀ —฀ ฀ —
฀ ฀ Interest฀on฀reserves฀฀฀฀ ฀ 33฀ ฀ (16)฀ ฀ (29)฀ ฀฀
฀฀฀฀฀฀ Other,฀net฀฀฀฀ ฀ (5)฀ ฀ (6)฀ ฀ 10฀ ฀฀
฀ (Benefit)฀provision฀for฀
฀ ฀ income฀taxes฀฀฀ $฀(175)฀ $฀ (85)฀ $฀133฀฀฀฀
During฀2004,฀the฀Company฀reached฀a฀settlement฀with฀the฀Internal฀
Revenue฀Service฀(IRS)฀covering฀tax฀years฀1982-1992.฀As฀a฀result,฀the฀฀
Company฀recognized฀a฀tax฀benefit฀of฀$37฀million฀in฀2004,฀which฀consisted฀
of฀benefits฀of฀$32฀million฀related฀to฀a฀formal฀concession฀concerning฀the฀
taxation฀of฀certain฀intercompany฀royalties฀that฀could฀not฀legally฀be฀distrib-
uted฀to฀the฀parent฀entity฀and฀$9฀million฀related฀to฀the฀income฀tax฀treatment฀
of฀a฀patent฀infringement฀litigation฀settlement,฀and฀a฀$4฀million฀charge฀
related฀to฀other฀tax฀items.฀The฀Company฀also฀reached฀a฀favorable฀resolution฀
of฀interest฀calculations฀for฀these฀years,฀and฀recorded฀a฀benefit฀of฀$8฀million.฀
Finally,฀the฀Company฀recorded฀net฀charges฀of฀$13฀million฀for฀adjustments฀
for฀audit฀years฀1993฀and฀thereafter.
The฀audit฀for฀tax฀years฀1993-1998฀has฀progressed฀to฀the฀adminis-
trative฀appeals฀level฀of฀the฀IRS฀and฀the฀Company฀anticipates฀that฀it฀will฀
be฀formally฀settled฀during฀2005.฀The฀finalization฀of฀this฀settlement฀could฀
have฀a฀significant฀impact฀upon฀the฀Company’s฀2005฀effective฀tax฀rate฀and฀
operating฀results฀because฀the฀settlement฀covers฀six฀years฀and฀also฀includes฀
significant฀transactional฀activity฀associated฀with฀the฀disposition฀of฀various฀
businesses.
During฀2003,฀the฀Company฀recorded฀a฀tax฀benefit฀of฀$13฀million฀
related฀to฀the฀donation฀of฀intellectual฀property฀in฀the฀form฀of฀technology฀
patents฀to฀a฀tax-qualified฀organization.฀฀
During฀2002,฀the฀Company฀recorded฀a฀tax฀benefit฀of฀$91฀million฀
relating฀to฀business฀closures฀and฀restructuring฀of฀certain฀subsidiaries.฀Addi-
tionally,฀the฀Company฀recorded฀a฀tax฀benefit฀of฀$8฀million฀relating฀to฀a฀land฀
donation.฀Also,฀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.฀฀฀