|
Notes to Consolidated Financial Statements
Note 12 - Income Taxes
U.S. and foreign income from continuing operations before income taxes:
|
|
1998
|
1997
|
1996
|
|
|
|
|
|
U.S.
|
$
|
1,629
|
$
|
1,731
|
$
|
1,630
|
|
|
Foreign
|
634
|
578
|
(64
|
)
|
|
|
|
|
|
$
|
2,263
|
$
|
2,309
|
$
|
1,566
|
|
|
Provision for income taxes on income from continuing operations:
|
|
1998
|
.
|
1997
|
1996
|
|
|
|
|
|
Current:
|
Federal
|
$
|
(193
|
)
|
$
|
598
|
$
|
254
|
|
|
|
Foreign
|
267
|
.
|
110
|
138
|
|
|
|
State
|
46
|
.
|
59
|
72
|
|
|
|
|
|
|
120
|
.
|
767
|
464
|
|
|
|
|
|
Deferred:
|
Federal
|
136
|
.
|
23
|
204
|
|
|
|
Foreign
|
4
|
.
|
15
|
(41
|
)
|
|
|
State
|
10
|
.
|
13
|
(3
|
)
|
|
|
|
|
|
150
|
.
|
51
|
160
|
|
|
|
|
|
|
$
|
270
|
.
|
$
|
818
|
$
|
624
|
|
|
Reconciliation of the U.S. Federal statutory tax rate to our effective tax rate on continuing operations:
|
|
1998
|
.
|
1997
|
1996
|
|
|
|
|
|
U.S. Federal statutory tax rate
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
|
State income tax, net of Federal
|
.
|
|
|
|
tax benefit
|
1.6
|
.
|
2.0
|
2.9
|
|
|
Effect of lower taxes
|
.
|
|
|
|
on foreign results
|
(3.0
|
)
|
(5.5
|
)
|
(4.4
|
)
|
|
Settlement of prior years'
|
.
|
|
|
|
audit issues
|
(5.7
|
)
|
(1.7
|
)
|
(2.9
|
)
|
|
Puerto Rico settlement
|
(21.8
|
)
|
-
|
-
|
|
|
Effect of unusual impairment
|
.
|
|
|
|
and other items
|
3.4
|
.
|
2.2
|
9.7
|
|
|
Other, net
|
2.4
|
.
|
3.4
|
(0.5
|
)
|
|
|
|
|
Effective tax rate on continuing
|
.
|
|
|
|
operations
|
11.9
|
%
|
35.4
|
%
|
39.8
|
%
|
|
In 1998, we reached final agreement with the IRS to settle substantially all remaining aspects of a tax case related to our concentrate operations in Puerto Rico. As a result, we recognized a tax benefit totaling $494 million (or $0.32 per share) which reduced our 1998 provision for income taxes.
Deferred taxes are recorded to give recognition to temporary differences between the tax bases of assets or liabilities and their reported amounts in the financial statements. We record the tax effect of the temporary differences as deferred tax assets or deferred tax liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in future years. Deferred tax liabilities generally represent items that we have taken a tax deduction for, but have not yet recorded in the income statement.
Deferred tax liabilities (assets):
|
|
1998
|
.
|
1997
|
|
|
|
|
|
Intangible assets other than
|
.
|
|
|
|
nondeductible goodwill
|
$
|
1,444
|
.
|
$
|
1,363
|
|
|
Property, plant and equipment
|
665
|
.
|
500
|
|
|
Safe harbor leases
|
109
|
.
|
115
|
|
|
Zero coupon notes
|
79
|
.
|
84
|
|
|
Other
|
473
|
.
|
335
|
|
|
|
|
|
Gross deferred tax liabilities
|
2,770
|
.
|
2,397
|
|
|
|
|
|
Net operating loss carryforwards
|
(562
|
)
|
(520
|
)
|
|
Postretirement benefits
|
(246
|
)
|
(247
|
)
|
|
Various current liabilities
|
.
|
|
|
|
and other
|
(702
|
)
|
(510
|
)
|
|
|
|
|
Gross deferred tax assets
|
(1,510
|
)
|
(1,277
|
)
|
|
Deferred tax assets
|
.
|
|
|
|
valuation allowance
|
571
|
.
|
458
|
|
|
|
|
|
Net deferred tax assets
|
(939
|
)
|
(819
|
)
|
|
|
|
|
Net deferred tax liabilities
|
$
|
1,831
|
.
|
$
|
1,578
|
|
|
|
|
|
Included in:
|
.
|
|
|
Prepaid expenses, deferred income
|
.
|
|
|
|
taxes and other current assets
|
$
|
(172
|
)
|
$
|
(119
|
)
|
|
Deferred income taxes
|
2,003
|
.
|
1,697
|
|
|
|
|
|
|
$
|
1,831
|
.
|
$
|
1,578
|
|
|
Deferred tax liabilities are not recognized for temporary differences related to investments in foreign subsidiaries and in unconsolidated
foreign affiliates that are essentially permanent in duration. It would not be practicable to determine the amount of any such deferred
tax liabilities.
Net operating losses of $2.7 billion at year-end 1998 were carried forward and are available to reduce future taxable income of certain subsidiaries in a number of foreign and state jurisdictions. These net operating losses will expire as follows: $96 million in 1999, $2.4 billion between 2000 and 2012, while $201 million may be carried forward indefinitely.
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