COKE » Topics » Income Taxes

These excerpts taken from the COKE 10-K filed Mar 13, 2009.
Income Taxes
 
The Company’s effective income tax rate for 2008 was 48.0% compared to 38.4% in 2007. The higher effective income tax rate for 2008 resulted primarily from an increase in the Company’s reserve for uncertain tax positions. See Note 14 of the consolidated financial statements for additional information.
 
The Company’s income tax assets and liabilities are subject to adjustment in future periods based on the Company’s ongoing evaluations of such assets and liabilities and new information that becomes available to the Company.
 
Income Taxes
 
The Company’s effective income tax rate for 2007 was 38.4% compared to 25.4% in 2006. The lower effective tax rate in 2006 compared to 2007 resulted primarily from agreements reached with state taxing authorities in 2006. See Note 14 of the consolidated financial statements for additional information.
 
The adoption of FIN 48 and FSP FIN 48-1 effective January 1, 2007, did not have a material impact on the consolidated financial statements. See Note 14 of the consolidated financial statements for additional information related to the implementation of FIN 48 and FSP FIN 48-1.
 
In 2006, the Company reached agreements with state taxing authorities to settle certain prior tax positions for which the Company had previously provided reserves due to uncertainty of resolution. As a result, the Company reduced the valuation allowance on related deferred tax assets by $2.6 million and reduced the liability for uncertain tax positions by $2.3 million in 2006. This $4.9 million adjustment was reflected as a reduction of income tax expense in 2006. Also during 2006, the Company increased the liability for uncertain tax positions by $.5 million to reflect an interest accrual and an adjustment of the reserve for uncertain tax positions. The net effect of adjustments to the valuation allowance and liability for uncertain tax positions during 2006 was a reduction in income tax expense of $4.4 million.
 
Financial Condition
 
Total assets increased to $1.32 billion at December 28, 2008 from $1.29 billion at December 30, 2007 primarily due to increases in cash and cash equivalents and accounts receivable, trade offset by a decrease in property, plant and equipment, net. Property, plant and equipment, net decreased primarily due to lower levels of capital spending over the past several years.
 
Net working capital, defined as current assets less current liabilities, decreased by $136.8 million to a negative $97.8 million at December 28, 2008 from December 30, 2007.
 
Significant changes in net working capital from December 30, 2007 to December 28, 2008 were as follows:
 
  •  An increase in current portion of long-term debt of $169.3 million primarily due to the reclassification from long-term debt to current of $176.7 million of debentures which mature in May 2009 and July 2009.
 
  •  An increase in cash and cash equivalents of $35.5 million primarily due to cash flow from operations.
 
  •  An increase in accounts receivable, trade of $7.4 million due to the timing of collection of payments.
 
  •  An increase in accounts payable to The Coca-Cola Company of $23.7 million primarily due to timing of payments.
 
  •  A decrease in accounts payable, trade of $8.9 million primarily due to the timing of payments.
 
Debt and capital lease obligations were $669.1 million as of December 28, 2008 compared to $679.1 million as of December 30, 2007. Debt and capital lease obligations as of December 28, 2008 and December 30, 2007 included $77.6 million and $80.2 million, respectively, of capital lease obligations related primarily to Company facilities.


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The Company recorded a minimum pension liability adjustment of $5.4 million, net of tax, as of December 31, 2006 as a result of the plan curtailment discussed in Note 17 to the consolidated financial statements. The Company adopted the provisions of SFAS No. 158 at the end of 2006. Pension and postretirement liabilities were adjusted to reflect the excess of the projected benefit obligation (pension) and the accumulated postretirement benefit obligation (postretirement medical) over available plan assets. The total SFAS No. 158 adjustment to increase benefit liabilities was $2.6 million, net of tax, with a corresponding adjustment to other comprehensive loss. The Company increased the pension liability by $73.1 million with a corresponding increase in other comprehensive loss, net of tax, in 2008 primarily as a result of the decrease in the value of the pension plan assets during 2008. Contributions to the Company’s pension plans were $.2 million in 2008. There were no contributions to the Company’s pension plans in 2007. The Company anticipates that contributions to the principal Company-sponsored pension plan in 2009 will be in the range of $8 million to $12 million.
 
Liquidity and Capital Resources
 
Income
Taxes



 



The Company’s effective income tax rate for 2008 was 48.0%
compared to 38.4% in 2007. The higher effective income tax rate
for 2008 resulted primarily from an increase in the
Company’s reserve for uncertain tax positions. See
Note 14 of the consolidated financial statements for
additional information.


 



The Company’s income tax assets and liabilities are subject
to adjustment in future periods based on the Company’s
ongoing evaluations of such assets and liabilities and new
information that becomes available to the Company.


 




Income
Taxes



 



The Company’s effective income tax rate for 2007 was 38.4%
compared to 25.4% in 2006. The lower effective tax rate in 2006
compared to 2007 resulted primarily from agreements reached with
state taxing authorities in 2006. See Note 14 of the
consolidated financial statements for additional information.


 



The adoption of FIN 48 and FSP
FIN 48-1
effective January 1, 2007, did not have a material impact
on the consolidated financial statements. See Note 14 of
the consolidated financial statements for additional information
related to the implementation of FIN 48 and FSP
FIN 48-1.


 



In 2006, the Company reached agreements with state taxing
authorities to settle certain prior tax positions for which the
Company had previously provided reserves due to uncertainty of
resolution. As a result, the Company reduced the valuation
allowance on related deferred tax assets by $2.6 million
and reduced the liability for uncertain tax positions by
$2.3 million in 2006. This $4.9 million adjustment was
reflected as a reduction of income tax expense in 2006. Also
during 2006, the Company increased the liability for uncertain
tax positions by $.5 million to reflect an interest accrual
and an adjustment of the reserve for uncertain tax positions.
The net effect of adjustments to the valuation allowance and
liability for uncertain tax positions during 2006 was a
reduction in income tax expense of $4.4 million.


 




Financial
Condition



 



Total assets increased to $1.32 billion at
December 28, 2008 from $1.29 billion at
December 30, 2007 primarily due to increases in cash and
cash equivalents and accounts receivable, trade offset by a
decrease in property, plant and equipment, net. Property, plant
and equipment, net decreased primarily due to lower levels of
capital spending over the past several years.


 



Net working capital, defined as current assets less current
liabilities, decreased by $136.8 million to a negative
$97.8 million at December 28, 2008 from
December 30, 2007.


 



Significant changes in net working capital from
December 30, 2007 to December 28, 2008 were as follows:


 
























































  • 

An increase in current portion of long-term debt of
$169.3 million primarily due to the reclassification from
long-term debt to current of $176.7 million of debentures
which mature in May 2009 and July 2009.
 
  • 

An increase in cash and cash equivalents of $35.5 million
primarily due to cash flow from operations.
 
  • 

An increase in accounts receivable, trade of $7.4 million
due to the timing of collection of payments.
 
  • 

An increase in accounts payable to The
Coca-Cola
Company of $23.7 million primarily due to timing of
payments.
 
  • 

A decrease in accounts payable, trade of $8.9 million
primarily due to the timing of payments.


 



Debt and capital lease obligations were $669.1 million as
of December 28, 2008 compared to $679.1 million as of
December 30, 2007. Debt and capital lease obligations as of
December 28, 2008 and December 30, 2007 included
$77.6 million and $80.2 million, respectively, of
capital lease obligations related primarily to Company
facilities.





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Table of Contents






The Company recorded a minimum pension liability adjustment of
$5.4 million, net of tax, as of December 31, 2006 as a
result of the plan curtailment discussed in Note 17 to the
consolidated financial statements. The Company adopted the
provisions of SFAS No. 158 at the end of 2006. Pension
and postretirement liabilities were adjusted to reflect the
excess of the projected benefit obligation (pension) and the
accumulated postretirement benefit obligation (postretirement
medical) over available plan assets. The total
SFAS No. 158 adjustment to increase benefit
liabilities was $2.6 million, net of tax, with a
corresponding adjustment to other comprehensive loss. The
Company increased the pension liability by $73.1 million
with a corresponding increase in other comprehensive loss, net
of tax, in 2008 primarily as a result of the decrease in the
value of the pension plan assets during 2008. Contributions to
the Company’s pension plans were $.2 million in 2008.
There were no contributions to the Company’s pension plans
in 2007. The Company anticipates that contributions to the
principal Company-sponsored pension plan in 2009 will be in the
range of $8 million to $12 million.


 




Liquidity
and Capital Resources



 




Income Taxes
 
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss and tax credit carryforwards as well as differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
 
A valuation allowance will be provided against deferred tax assets if the Company determines it is more likely than not, such assets will not ultimately be realized.
 
The Company does not recognize a tax benefit unless it concludes that it is more likely than not that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that, in the Company’s judgment, is greater than 50 percent likely to be realized. The Company records interest and penalties related to unrecognized tax positions in income tax expense.


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Table of Contents

 
COCA-COLA BOTTLING CO. CONSOLIDATED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Income
Taxes



 



Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to operating loss and
tax credit carryforwards as well as differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date.


 



A valuation allowance will be provided against deferred tax
assets if the Company determines it is more likely than not,
such assets will not ultimately be realized.


 



The Company does not recognize a tax benefit unless it concludes
that it is more likely than not that the benefit will be
sustained on audit by the taxing authority based solely on the
technical merits of the associated tax position. If the
recognition threshold is met, the Company recognizes a tax
benefit measured at the largest amount of the tax benefit that,
in the Company’s judgment, is greater than 50 percent
likely to be realized. The Company records interest and
penalties related to unrecognized tax positions in income tax
expense.





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Table of Contents





 




COCA-COLA
BOTTLING CO. CONSOLIDATED




 




NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


 




These excerpts taken from the COKE 10-K filed Mar 13, 2008.
Income Taxes
 
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss and tax credit carryforwards as well as differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
 
A valuation allowance will be provided against deferred tax assets if the Company determines it is more likely than not, such assets will not ultimately be realized.
 
The Company does not recognize a tax benefit unless it concludes that it is more likely than not that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that, in the Company’s judgment, is greater than 50 percent likely to be realized. The Company records interest and penalties related to unrecognized tax positions in income tax expense.
 
Income
Taxes



 



Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to operating loss and
tax credit carryforwards as well as differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date.


 



A valuation allowance will be provided against deferred tax
assets if the Company determines it is more likely than not,
such assets will not ultimately be realized.


 



The Company does not recognize a tax benefit unless it concludes
that it is more likely than not that the benefit will be
sustained on audit by the taxing authority based solely on the
technical merits of the associated tax position. If the
recognition threshold is met, the Company recognizes a tax
benefit measured at the largest amount of the tax benefit that,
in the Company’s judgment, is greater than 50 percent
likely to be realized. The Company records interest and
penalties related to unrecognized tax positions in income tax
expense.


 




This excerpt taken from the COKE 10-Q filed May 11, 2007.

Income Taxes

The Company’s effective income tax rate for Q1 2007 was 39.2% compared to 40.7% in Q1 2006. The lower effective tax rate in Q1 2007 resulted primarily from an increased manufacturing deduction benefit in 2007 compared to 2006. The manufacturing deduction was enacted as part of the American Jobs Creation Act of 2004, which provides a tax deduction for qualified production activities. The allowed deduction increased to 6% in 2007 from 3% in 2006. The Company’s income tax rate for the remainder of 2007 is dependent upon results of operations and may change if the results for 2007 are different from current expectations.

In June 2006, FASB issued FIN 48. FIN 48 clarifies the accounting for uncertainty in income taxes recognized by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure. FIN 48 was effective as of January 1, 2007. The adoption of FIN 48 did not have a material impact on the consolidated financial statements. See Note 15 to the consolidated financial statements for additional information related to the implementation of FIN 48.

The Company’s income tax assets and liabilities are subject to adjustment in future periods based on the Company’s ongoing evaluations of such assets and liabilities and new information that becomes available to the Company.

This excerpt taken from the COKE 10-K filed Mar 14, 2007.

Income Taxes

 

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss and tax credit carryforwards as well as differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

A valuation allowance will be provided against deferred tax assets if the Company determines it is more likely than not, such assets will not ultimately be realized. In addition, the Company records liabilities for uncertain tax positions principally related to state income taxes and certain federal income tax attributes. These liabilities reflect the Company’s best estimate of the ultimate income tax liabilities based on currently known facts and information. Material changes in facts and information as well as the expiration of statutes and/or settlements with the individual state or federal jurisdictions could result in material adjustments to these estimates in the future.

 

This excerpt taken from the COKE 10-Q filed Nov 13, 2006.

Income Taxes

The Company’s effective income tax rate for YTD 2006 was 41.1% compared to 41.5% for YTD 2005. The effective income tax rate reflects expected full year 2006 earnings. The Company’s income tax rate for the remainder of 2006 is dependent upon results of operations and may change if the results for 2006 are different from current expectations.

The Company’s income tax assets and liabilities are subject to adjustment in future periods based on the Company’s ongoing evaluations of such assets and liabilities and new information that becomes available to the Company.

 

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Table of Contents
This excerpt taken from the COKE 10-Q filed Aug 16, 2006.

Income Taxes

The Company’s effective income tax rate for YTD 2006 was 41.6% compared to 41.9% for YTD 2005. The effective income tax rate reflects expected full year 2006 earnings. The Company’s income tax rate for the remainder of 2006 is dependent upon results of operations and may change if the results for 2006 are different from current expectations.

The Company’s income tax assets and liabilities are subject to adjustment in future periods based on the Company’s ongoing evaluations of such assets and liabilities and new information that becomes available to the Company.

This excerpt taken from the COKE 10-Q filed May 11, 2006.

Income Taxes

The Company’s effective income tax rate for Q1 2006 was 40.7% compared to 40.5% for Q1 2005. The effective income tax rate reflects expected full year 2006 earnings. The Company’s income tax rate for the remainder of 2006 is dependent upon results of operations and may change if the results for 2006 are different from current expectations.

 

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Table of Contents

The Company’s income tax assets and liabilities are subject to adjustment in future periods based on the Company’s ongoing evaluations of such assets and liabilities and new facts and information that become available to the Company.

This excerpt taken from the COKE 10-K filed Mar 16, 2006.

Income Taxes

 

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss and tax credit carryforwards as well as differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance will be provided against deferred tax assets if the Company determines it

 

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COCA-COLA BOTTLING CO. CONSOLIDATED

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

is more likely than not such assets will not ultimately be realized. In addition, the Company records liabilities for uncertain tax positions principally related to state income taxes and certain federal income tax attributes. These liabilities reflect the Company’s best estimate of the ultimate income tax liabilities based on currently known facts and information. Material changes in facts and information as well as the expiration of statutes and/or settlements with the individual state or federal jurisdictions could result in material adjustments to these estimates in the future.

 

This excerpt taken from the COKE 10-Q filed Nov 10, 2005.

Income Taxes

 

The Company’s effective income tax rate for the first nine months of 2005 was 41.5% compared to 42.1% for the first nine months of 2004. The Company estimates that the adoption of FAS 109-1 will reduce the Company’s effective income tax rate by approximately 1% in 2005.

 

During the second quarter of 2005, the Company entered into a settlement agreement with a state whereby the Company agreed to reduce certain net operating loss carryforwards and to pay certain additional taxes and interest relating to prior years. The loss of state net operating loss carryforwards, net of federal tax benefit, of $4.4 million did not have an effect on the provision for income taxes due to a valuation allowance previously recorded for such deferred tax assets. Under this settlement, the Company was required to pay $5.7 million in the second quarter of 2005 and is required to pay an additional $5.0 million by April 15, 2006. The amounts paid and the liability remaining in excess of reserves previously recorded had the effect of increasing income tax expense by approximately $4.1 million in the second quarter of 2005. Based on analysis of current facts, the Company also made adjustments to reserves for income tax exposure in other states in the second quarter which had the effect of decreasing income tax expense by $3.8 million. The Company’s income tax reserves are subject to adjustment in future periods based on the Company’s ongoing evaluations of its income tax liabilities and new information that becomes available to the Company.

 

The Company’s effective tax rate for the first nine months of 2005 reflects expected full year 2005 earnings. The Company’s effective income tax rate for the remainder of 2005 is dependent upon operating results and may change if the results for the year are different from current expectations.

 

This excerpt taken from the COKE 10-Q filed Aug 12, 2005.

Income Taxes

 

The Company’s effective income tax rate for the first half of 2005 was 41.9% compared to 40.9% for the first half of 2004. The Company estimates that the adoption of FAS 109-1 will reduce the Company’s effective income tax rate by approximately 1%.

 

During the second quarter of 2005, the Company entered into a settlement agreement with a state whereby the Company agreed to reduce certain net operating loss carryforwards and to pay certain additional taxes and interest relating to prior years. The loss of state net operating loss carryforwards, net of federal tax benefit, of $4.4 million did not have an effect on the provision for income taxes due to a valuation allowance previously

 

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recorded for such deferred tax assets. Under this settlement, the Company was required to pay state income taxes of $5.7 million in the second quarter of 2005 and is required to pay an additional $5.0 million by April 15, 2006. The amounts paid and the liability remaining in excess of reserves previously recorded had the effect of increasing income tax expense by approximately $4.1 million in the second quarter of 2005. Based on analysis of current facts, the Company also made adjustments to reserves for income tax exposure in other states in the second quarter which had the effect of decreasing income tax expense by $3.8 million. The Company’s income tax reserves are subject to adjustment in future periods based on the Company’s ongoing evaluations of its income tax liabilities and new information that becomes available to the Company.

 

The Company’s effective tax rate for the first half of 2005 reflects expected full year 2005 earnings. The Company’s effective income tax rate for the remainder of 2005 is dependent upon operating results and may change if the results for the year are different from current expectations.

 

This excerpt taken from the COKE 10-Q filed May 12, 2005.

Income Taxes

 

The Company’s effective income tax rate for the first quarter of 2005 was 40.5% compared to 41.1% for the first quarter of 2004. The Company estimates that the adoption of FAS 109-1 will reduce the Company’s provision for income taxes in fiscal year 2005 by approximately $1 million.

 

The Company’s effective tax rate for the first quarter of 2005 reflects expected 2005 earnings. The Company’s effective income tax rate for the remainder of 2005 is dependent upon operating results and may change if the results for the year are different from current expectations.

 

This excerpt taken from the COKE 10-K filed Mar 15, 2005.

Income Taxes

 

The Company provides deferred income taxes for the tax effects of temporary differences between the financial reporting and income tax bases of the Company’s assets and liabilities. The Company records a valuation allowance to reduce the carrying value of its deferred tax assets to an amount that is more likely than not to be realized.

 

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